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Exploring the Popularity of Private Benefits Exchanges

Historically, American companies structured their healthcare benefits in a defined benefits model (DB), which involves a set of benefits or plan payable by the employer. According to Russell Investments, DB plans became popular in the 1950s as a way for employers to attract workers by providing pensions and healthcare benefits. Formerly, healthcare benefits helped corporations and even government entities remain competitive in the market for job seekers. However, during recessions healthcare costs never stopped increasing whilst businesses suffered losses and underwent layoffs or mergers. The cost of paying former employees' pensions combined with the responsibility of paying for current employees' healthcare, especially in cases of serious illness, presented a risk.

Employer-sponsored healthcare was less popular, but alternatives were not adopted on a widespread basis until healthcare reforms of the Obama administration occurred. When healthcare reform transpired in the past decade, one of the most visible changes was the popularization of insurance sold in the marketplace. Insurance companies emerged with a variety of options designed to initially provide affordable premiums for those who had been uninsured under small businesses or elsewhere. Larger corporations took note and some began to point their employees in the direction of the growing private marketplace, as a means of still contributing to their healthcare plans. Consequently, corporations mitigated uncapped healthcare costs through private benefit exchanges. 

These private benefit exchanges, or direct contributions (DC) are most popular alternative to traditional benefit structuring (DBs). In the DC model, the employer makes contributions to a health savings account belonging to the employee. The employee has the choice to elect whichever insurance carrier they prefer by utilizing the healthcare marketplace. However, this market differs from the public marketplace offered by the government because large groups can be covered rather than individuals or small groups. Additionally, it is the insurer who then purchases the healthcare plan and the employee elects the carrier out of a subset of employer-sponsored choices. The employee is rewarded with more insurance options than one mandated by the company. 

DCs are favored by organizations because the employer arranges the contract and establishes the limits of the coverage. The employer can elect how to manage payroll deductions or payments to the employee for the purpose of funding the employee-chosen insurance plan. There are actually two different types of DCs that have flourished in the past decade. There are single-carrier and multi-carrier exchanges, which are catered to the contrasting needs of various employers. Single-carrier exchanges allow the employee to select the carrier and plan, with the employer being capable of customizing some portions of the plan at will. Multi-carrier exchanges are similar, but the worker has less control over the options. An authorized third-party negotiates the contracts, allowing employees to handpick certain plans and products. 

Private benefit exchanges are projected to remain viable solutions to the current insurance situation because employees require healthcare, employers will seek the most cost-efficient method of insuring them, and payors will want to participate in as many sectors as possible. Many are uncertain about the future of healthcare and its corresponding models, but insurance carriers garnered major profit earnings in the past few years. This enabled them to have more experienced staff and to invest in new employees. Payors have the resources to education reluctant employers and negotiate federal and state changes in insurance coverage. 

At MedPut, we work with employers, employees, and providers on the private exchange. We work with employers to customize plans with existing HSAs or supplemental plans. Our goal is to help these employers insure their employees and to ease the cost of medical bills. We offer discounts on medical bills, payoff assistance, and never charge employees interest. For providers, we finance bills upfront and pay them immediately for their services. We are confident that the private exchange market resolves many of the unanswered coverage gaps in the modern insurance industry.