Public vs. private health insurance exchanges

Health insurance coverage can help minimize your out-of-pocket costs for medical care. If you don’t have employer-sponsored health insurance, you can enroll in a plan on your own. 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. Both options allow individuals to purchase health insurance. But, each has its own unique advantages that may be more beneficial to you based on your circumstances.

In this article, we'll guide you through the nuances of public and private health exchanges to help you make the best decision for you and your family.

In this blog post, you'll learn the following:

• What makes a federal exchange different from a private exchange.
• The benefits of buying a marketplace plan.
• The advantages of using a private health insurance exchange

What is a health insurance exchange?

Before we get into how public and private health exchanges compare, let's first define what an exchange is. A health insurance exchange is an online marketplace where individuals can compare and purchase individual health insurance plans. Small businesses can also use an exchange to find a small group health insurance plan.

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. Regardless of which type of exchange you’re using, you can only enroll in or switch coverage during Open Enrollment or if you experience a qualifying life event. In this case, the qualifying event will trigger a special enrollment period.

What are the four most common health insurance plans?

Before you choose a health insurance policy, you need to know the different types available.

The four most common health insurance plans are:

• Preferred provider organization (PPO) plans
• Health maintenance organization (HMO) plans
• Point of service (POS) plans
• Exclusive provider organization (EPO) plans

What is on-exchange vs. off-exchange?

On-exchange and off-exchange refer to the different platforms where people can buy health insurance under the ACA.

Government-run marketplaces provide on-exchange health insurance that allows consumers to:

• Compare plans
• Check their eligibility for income-based subsidies
• Enroll in coverage

In contrast, off-exchange coverage refers to plans purchased directly from insurance companies or through brokers without going through a state or federal marketplace. Unlike on-exchange plans, these plans don’t qualify for health insurance subsidies. However, they must adhere to the ACA’s consumer protection policies. They can also provide more coverage options and flexibility beyond the standard offerings.

Choosing between an on-exchange and off-exchange health insurance plan comes down to your personal situation and whether you qualify for financial help.

Public health insurance exchanges

Plans sold on a public exchange are sometimes called “on-exchange.” A public health insurance exchange is a marketplace 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.

To be ACA-compliant, all health plans sold on public exchanges must meet 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 tiers, or metal levels, of insurance coverage.
• Plans must cover the ten essential health benefits. This includes 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 plans or silver plans—usually only cover basic medical care. But if you choose a higher tier plan—like gold plans or platinum plans—you can receive greater coverage and pay less out-of-pocket for 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. You can view or download each plan’s summary of benefits and coverage (SBC) to learn more.

Advantages of using a public health insurance exchange

There are many advantages to enrolling in a plan through the public exchanges.

Convenience

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 tend to have free customer support by chat or phone to answer any questions you may have.

Depending on the plans available in your area, you can also enroll in dental or vision plans.

Marketplace subsidies

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. They help people with lower annual incomes reduce the cost of their monthly premiums.

Federal 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 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.

Private health insurance exchanges

Private health insurance companies and 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. It must 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.

Advantages of using a private health insurance exchange

So, what are the advantages of using a private exchange?

More insurance plan options

Private exchanges offer clear benefits if you want to see every type of plan that’s available to you. Unlike public exchanges, which only allow you to shop ACA-compliant medical plans, private exchanges offer a wider variety of plan choices.

On a private exchange, you can find:

• Vision plans
• Dental coverage
• Critical illness plans
• Wellness services
• Short-term health insurance plans
• Fertility benefits, including newborn care

If you're an employer, the options you have off-exchange allow you to create a more customized health benefit to fit your employees' specific needs, aiding in greater employee satisfaction and overall retention.

Cost-control

Off-exchange options often include more customizable plans with different levels of coverage, deductibles, and premiums, which can allow you to find a plan that better fits your budget. Some off-exchange plans may include lower-cost options by offering different networks, coverage limits, or excluding certain benefits that may not be needed.

Personalized support

While you can use a broker to shop on-exchange, you may get more personalized, white-glove service off-exchange. Licensed brokers tend to have more expertise in dealing with health insurers. They have vast knowledge of the private insurance options they offer. They can work with you to find affordable and comprehensive health insurance coverage for you and your employees.

Have a QSEHRA or ICHRA through PeopleKeep? Here’s how we can help

If your employer offers you a qualified small employer health reimbursement arrangement (QSEHRA) or an individual coverage HRA (ICHRA) through PeopleKeep, you have another option. You can shop for a qualifying individual health insurance plan right from your PeopleKeep account.

Our HRA administration platform shows you available on-exchange health plans, as well as off-exchange ancillary policies. Through our platform, you can compare health policies based on network type, metal tier, or carrier, and see what each plan’s deductible and maximum out-of-pocket costs will be. That way, you can easily select the best plan for your needs.

Conclusion

A health insurance plan can reduce your out-of-pocket costs for medical services. 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 November 12, 2024.

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