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Iowa Employers and Health ‘Exchanges’

Healthcare ExchangesAs employers review their health insurance options for 2015, we know that some may have interest in learning more about electronic marketplaces – better known as ‘exchanges.’

Exchanges basically come in two varieties – private and public. Private exchanges are established by benefit consultants, insurance companies and other third party vendors. Under the auspices of the Affordable Care Act (ACA), public exchanges were implemented to allow qualified individuals to receive premium subsidies from the federal government. In addition, small businesses with fewer than 25 full-time equivalent employees may be eligible for premium tax credits depending on the average wages paid to employees.

Iowa has a hybrid public exchange – which is a joint federal/state arrangement. Also known as a ‘partnership’ exchange, it is similar to the federal public exchange, whereby subsidies and small business tax credits are available for qualifying individuals and businesses.

As we all know, the primary concern for employers who offer health insurance is COST. Cost drives behaviors for both employers and their employees, resulting in health plan alterations that can help alleviate (but not solve) annual premium jumps. Usually plan design changes come in the form of elevated deductibles, copayments, out-of-pocket maximums and employee contributions. Such behaviors result in shifting costs to others but does not address the fundamental issues that adversely impact health costs.

Inevitably, questions arise about the growth of exchanges and how they may eventually contain costs. Will employers embrace the exchanges here in Iowa and elsewhere? Can annual premium increases be tempered due to the eventual ascension of exchanges, both private and public? Without a doubt, many questions surface as to whether exchanges can and will make a difference with cost. Yet, the waters remain turbulent and uncertain for the foreseeable future.

Within our 2014 Study, we did ask employers about their intentions to offer health coverage through a private or public exchange in 2015. From this, we learned that 15 percent of Iowa employers appear interested in exchanges for 2015, with almost 21 percent coming from employers with fewer than 250 employees.

Interest in Exchanges for 2015Based on organizational size, the smallest employers appear more likely to embrace participation in exchanges, as 32 percent of employers with 2 – 10 employees indicated interest. While only three percent of employers with 201+ employees show interest in exchanges for 2015.

Interest in Exchanges by Employer Size

Of those 15 percent of employers interested in exchanges, about 29 percent (coming only from organizations with under 250 employees) responded that their preference would be to explore only private exchanges, while five percent indicated they would consider public exchanges. Two-thirds (66 percent) of employers who have interest in exchanges responded to having interest in both the private and public exchanges.

Type of Exchange

Will exchanges make a great impact to the cost problem confronted by individuals and employers? My simple answer is no, employers should avoid having high expectations that electronic marketplaces will somehow control health costs. This would be pure delusions of grandeur. Expecting exchanges to control costs is nothing more than rearranging chairs on the Titanic – it may feel like progress is being made, but the bow of the ship has a gaping hole that requires immediate attention. The gaping hole that I am referring to is a dysfunctional healthcare system and unhealthy lifestyles.

Make no mistake, merely shifting costs to employees should not be confused with controlling costs.

Health exchanges may likely be beneficial in other areas for employers and their employees, just not in controlling health costs. Let’s first fix that hole.

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