Consumers these days have a few ways to shop for health insurance coverage. One choice you have while shopping for healthcare coverage is whether to use a public or private 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 on 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 how public and private health exchanges are similar and distinct from one another, 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 selection of health insurance companies and plans to shop.
- 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 a private exchange plan to a public exchange plan outside of open enrollment unless you experience a qualifying life event. In this case, the event will trigger a special enrollment period.
What is a public health insurance exchange?
A public health insurance exchange is a marketplace that is operated by the federal government, a state government, or a government-contracted entity. These government exchanges allow individuals to browse various qualified health plans from different insurance companies. Though the marketplace itself is public, the plans featured on the exchange aren't. Popular public exchanges include the federal Marketplace and state-based Marketplaces.
Individual consumers and small employers with fewer than 50 employees can purchase coverage from the public Marketplace. Plans sold on a public exchange are sometimes called “on-exchange.”
To be ACA-compliant, all health plans sold on public exchanges, whether on the federal Marketplace or a state-run exchange, must include the following criteria:
- Exchange policies 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.
Some health insurance policies sold on public exchanges—such as bronze or silver plans—typically only cover basic medical care. But if you choose a higher tier plan—like gold or platinum plans—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 plans on health insurance marketplaces, shoppers can see what each policy 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 for them by filtering their results 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.
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 people with lower annual incomes to reduce the cost of their monthly premiums.
Government 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-run exchange. Employees and employers can see if they’re eligible for Marketplace subsidies directly through their exchange.
What is a private health insurance exchange?
Private companies, such as insurance carriers or brokerage firms, run private health insurance exchanges. They typically offer more private coverage options for individuals and companies of all sizes. Private plans purchased through this type of exchange are sometimes called “off-exchange plans.”
Private insurance exchanges can sell individual health plans to consumers and 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. Suppose you buy an ACA-compliant plan through a private exchange. In that case, federal regulations require the plan to be the same price it would be on the public exchange and cover each essential health benefit that public exchanges cover.
However, eligible people can only receive premium tax credits or a cost-sharing subsidy with a plan purchased on a public exchange. As such, you can 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 plan options
Private exchanges offer clear benefits if you want more control over your healthcare choices. Unlike public exchanges, which can only provide ACA-compliant medical plans, private exchanges offer a variety of vision plans, dental coverage, and other additional benefits, like catastrophic plans, wellness services, short-term coverage, and fertility benefits, including newborn care.
If you’re an employer, the flexibility of off-exchange health plans allows you to create a more customized benefits experience 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 working 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 affordable and comprehensive health insurance coverage for you and your employees.
Once you find the medical insurance plan you want, you can enroll through your agent or broker rather than the insurance provider. Many consumers find this white-glove service to find an off-exchange plan easier than dealing with the federal Marketplace or other public exchanges on their own.
Both public and private health exchanges have 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 exchange plan options, 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 July 31, 2023.