Consumers these days have a few ways to shop for health insurance coverage. One choice they may be presented with while shopping for coverage is whether to use a public or private health insurance exchange.
While the Affordable Care Act (ACA) mandated the creation of public health exchanges, private exchanges have been rising in popularity over the years1. While both options allow individuals to purchase health insurance, each has its own unique advantages that may be more beneficial to you based off your circumstances.
Our article will guide you through the nuances of public and private health exchanges to help you make the best decision for you and your family.
What is a health insurance exchange?
Before we get into public and private health exchanges, let’s first define what an exchange is.. A health insurance exchange is an online marketplace for individuals to compare and purchase individual health insurance plans.
Health insurance exchanges typically include the following components:
- A variety of health insurance plans and options.
- Advice and recommendations about choosing the best health insurance option for your needs.
- Automated billing options for the health plan’s monthly premiums.
- Customer support for the selected health insurance plan(s).
The open enrollment period is the same whether you shop on a public or private exchange. You can’t switch from an private exchange plan to a public exchange plan outside of open enrollment unless you experience a qualifying life event, triggering a special enrollment period.
What is a public health insurance exchange?
Simply put, a public health insurance exchange is run by the federal government or a government-contracted entity. These government exchanges allow individuals to browse various qualified health plans from different insurance companies. Public exchanges include the federal Marketplace and state-based Marketplaces.
Marketplace coverage is purchased by individual consumers and small employers with up to 50 employees. Plans sold on a public exchange are sometimes referred to as “on-exchange.”
To be ACA-compliant, all health plans sold on public exchanges, whether they be the federal Marketplace or state-based, must include the following criteria:
- Plans must have an actuarial value of at least 60%. These plans are also known as bronze plans, which are part of the metal levels of insurance coverage.
- Plans must cover the ten essential health benefits, like prescription drugs, mental health services, preventive care, chronic disease management, and laboratory services.
- Plans must also include birth control coverage and breastfeeding coverage.
Health insurance plans sold on public exchanges—such as bronze-level plans—typically only cover basic medical care. But if you choose a higher tier plan—like silver, gold, or platinum—you can receive greater coverage and access to more medical services.
Additionally, specific plan services can vary based on your state’s requirements. When comparing health plans on health insurance marketplaces, shoppers can see exactly what each plan offers.
Advantages of using a public health insurance exchange
One advantage of using a public health insurance exchange is its convenience and accessibility. Shoppers can find the best plan that works for them by filtering by budget, network provider, location, covered medical services, and insurer all in one spot.
Health insurance marketplaces also typically have free customer support by chat or phone to answer any questions you may have along the way.
Individuals and small businesses may also qualify for financial subsidies on public exchanges. These forms of assistance include premium tax credits and cost-sharing reduction subsidies for low-income people to lower the cost of their monthly premiums.
Marketplace subsidies also include the small business healthcare tax credit for small employers that enroll through the Small Business Health Options Program (SHOP).
You can only receive premium subsidies through public coverage plans purchased via the federal Marketplace or a state-based Marketplace. Employees and employers can see if they’re eligible for Marketplace subsidies directly through their exchange.
What is a private health insurance exchange?
A private health insurance exchange is run by a private company, such as an insurance carrier or brokerage firm, and typically offers more private coverage options for individuals and companies of all sizes. Private plans purchased through this type of exchange are sometimes referred to as “off-exchange.”
Private insurance exchanges can sell individual health plans to consumers as well as traditional group health plans to employers. Off-exchange group plans may have minimum contribution or participation requirements for employers. Additionally, off-exchange individual health plans might come with household income eligibility thresholds for participants.
While public exchanges only offer ACA-compliant health plans, private exchanges can offer ACA-compliant and other health insurance plans. If you buy an ACA-compliant plan through a private exchange, federal regulations require the plan to be the same price it would be on the public exchange and cover each essential health benefit that’s covered on the public exchange.
However, eligible people can only receive premium tax credits or cost-sharing reduction subsidies with a plan purchased on a public exchange. As such, you may want to work through a licensed agent or a broker who can help you choose a private health plan that meets your needs and budget.
Advantages of using a private health insurance exchange
More insurance options
Private exchanges offer clear benefits if you want more control over your healthcare choices. Unlike public exchanges, which can only offer ACA-compliant medical plans, private exchanges offer a variety of vision plans, dental coverage, and other additional benefits, like catastrophic plans, wellness services, and fertility benefits, including newborn care.
If you’re an employer, this flexibility in plan offerings allows you to create a more customized benefits package to fit your employees’ specific needs, aiding in greater employee satisfaction and overall retention.
Employers using a private exchange generally pay for a portion of the health insurance coverage while their employees are responsible for paying their portion. Due to this, private insurance exchanges allow employers the opportunity to define an annual contribution amount for employees.
Another benefit of using a private exchange is the ability to work with a licensed broker. Brokers tend to have more expertise in dealing with insurers and have a vast amount of knowledge of the private insurance options they offer. They can work with you directly to find comprehensive and affordable health insurance coverage for you and your employees.
Once you find the plan you want, you can enroll through your agent rather than through the insurance company, which can be cumbersome. Many consumers find this white-glove service to find a private health plan easier than dealing with the federal Marketplace or other public exchanges on their own.
Both public and private health exchanges have their pros and cons for individuals shopping for a health insurance policy. To make the best choice, you should review your healthcare needs and your budget before choosing the right platform that will best serve your purposes.
If you have questions about the plans available on a public or private insurance exchange, talk with a health insurance broker. A broker can help you determine what policies will provide affordable coverage for you and your family.
This article was originally published on May 7, 2014. It was last updated on September 16, 2022.