Could Private Exchanges Save Health Care?

For many years, employers have struggled with providing health insurance to workers and their families. Competing for high-skilled workers typically requires offering fairly comprehensive benefits (valued at an average of $6,000 for an individual in 2014). Public-sector employers — states and municipalities — are often hemmed in by the old politics of powerful public-sector unions. Not surprisingly, their negotiated benefits are also routinely comprehensive and costly.

Nevertheless, employer-sponsored coverage will change in 2018. Obamacare’s “Cadillac Tax” — a 40 percent excise tax on all plans above a specified amount — will make these plans even more expensive. One safety valve, for both private and public employers, may be a new approach to employer-sponsored coverage: privately run health-insurance exchanges.

– A private exchange is a marketplace for private health plans. It enables workers to choose different health plans, weighing alternatives and balancing their costs and benefits.
– In a private exchange, an employer can make a defined contribution to a tax-free group plan chosen by the worker. If the worker purchases a less expensive plan, the worker can keep the difference in savings.
– In a well-run private exchange, self-insured employers can offer greater flexibility in benefit design, allowing workers and their families choice among a variety of health plans offered by multiple carriers.

Real choice and genuine market competition could spark the real health care change America has been waiting for — for far too long.

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