Public vs Private Health Exchanges

"A health exchange is a concept.... not a product"

The ZaneHRA Software provides a 100% paperless administration experience to employers and insurance professionals that want to offer better health benefits without a traditional group health insurance plan at lower costs. For more information about ZaneHRA, check out our Software.

Employers use ZaneHRA to open and manage their own stand-alone HRA or defined contribution health plan completely online, electronically enroll participants and print welcome kits, and monitor expenses and reimbursements in real-time.

Employees obtain their own individual health policies from a designated health insurance broker (see below), submit premium and medical expenses online, via fax, or mail, and receive same-day reimbursement via check, payroll addition, or direct deposit. Zane Benefits does not sell health insurance.

Insurance Professionals partner with Zane Benefits and use ZaneHRA to provide clients with a cost-saving health benefits option. Insurance brokers earn compensation on ZaneHRA referrals and retain 100% of the health insurance compensation from carriers. ZaneHRA is distributed by leading health insurance carriers, agencies, brokers, and accountants.

DISCLAIMERThe information provided herein by Zane Benefits is general in nature and should not be relied on for commercial decisions without conducting independent review and analysis and discussing alternatives with legal, accounting, and insurance advisors. Furthermore, health insurance regulations differ in each state; information provided does not apply to any specific U.S. state except where noted. See a licensed agent for detailed information on your state. www.ZaneBenefits.com

For additional resources on Health Care Reform, visit

www.zanebenefits.com/blog

Agenda

1. What is a Health Insurance Exchange?2. Private vs Public 3. Individual vs Group4. Overview of Private Health Exchanges5. Overview of Public Health Insurance Exchanges

What is a Health Insurance Exchange?

What is a Health Insurance Exchange?

The biggest buzzword of this decade

Webster defines an Exchange as:

"A place where things or services are exchanged, such as a store or shop specializing in merchandise usually of a particular type."

So, a health insurance exchange is: a store or shop specializing in health insurance merchandise

A "private" exchange is simply a health insurance exchange managed by a private company....

A "public" exchange is simply a health insurance exchange managed by a public entity

In its simplest terms, a health exchange is a insurer's, broker's or government's insurance offering to individuals and/or employers/employees

"A health exchange is a concept.... not a product"

4 Components of a Health Insurance Exchange

Today's health insurance exchanges typically include the following components:

1. CHOICE. A choice of two or more health insurance options

2. ADVICE. Advice and recommendation on what health insurance options best fit your needs

3. BILLING. Automated billing for the chosen health insurance plan premium(s)

4. SUPPORT. On-going support for the chosen health insurance plan(s)

Understanding How a Specific Health Exchange Works

Health insurance exchanges come in many different shapes and sizes.

To understand how a particular health insurance exchange (e.g. 2014 state exchanges) works, you must answer the following questions about the particular exchange:

1. Public vs Private. Is the health insurance exchange Public or Private?

2. Individual vs Group. Is the health insurance exchange Individual Market Based or Group Market Based?

3. Eligibility. Who is eligible to participate in the health insurance exchange?

4. Product. What products are available in the health insurance exchange?

5. Special Incentives. What is unique or special about the health insurance exchange? (e.g. subsidies)

Private vs Public Health Insurance Exchanges

Public vs Private Health Insurance Exchanges

Public and Private Exchanges Have the Same Core Components

A "private" exchange is managed by a private entity (e.g. a broker or insurer).

A "public" exchange is managed by a government entity (e.g. a state).

Special incentives for Public Exchanges include:

● Premium Tax Credits● Cost-sharing Tax Credits

Individuals/Employees can only access the tax credits through the public AHBE exchange.

Employers can only access the tax credits through the public SHOP exchange.

Individual vs Group-based Insurance Exchanges

2 Types of Health Insurance Exchanges

In general, there are two exchange models in the current marketplace:

1. Group Market Health Insurance Exchange – An exchange that sells “group” health insurance to employees of employers.

2. Individual Market Health Insurance Exchange – An exchange that sells “individual” health insurance to individuals and families (that may be employees).

Unique pieces of Group-based Exchanges include:

● No medical underwriting today (this is no longer unique in 2014)● Typically limited to single insurer (due to adverse selection)● Minimum Contribution and/or Participation Reqs for Employers (core problem)

Unique pieces of Individual-based Exchanges include:

● Portability● Typically multiple insurers ● No employer involvement in "sponsorship" of plans

Both can typically be pre-taxed through tax-advantaged "arrangements"

Individual vs Group-based Health Insurance Exchanges

#1 Group Market Health Insurance Exchange

This is traditionally referred to as a "Cafeteria Plan".

How it works:

1. The carrier/broker sells a group health plan to an employer.*

2. Employers decide how much money they want to spend on their employees’ health care coverage via defined amount or percentage of premium.

3. Employees select from multiple plan designs ranging from low to high deductibles, typically from a single carrier.

4. The employer pays the premiums directly to the carrier on behalf of the employees.

Example: www.bluekcexchange.com

*Requires employer to meet minimum contribution and/or participation requirements

#2 Individual Market Health Insurance Exchange

This is traditionally referred to as "Individual Health Insurance Quoting".

How it works:

1. The carrier/broker offers a variety of individual health plans to an Individual.

2. Individuals select from multiple plan designs ranging from low to high deductibles, typically from multiple carriers.

3. The Individual pays the premiums directly to the carrier out-of-pocket.*

Multi Carrier Example: www.ehealthinsurance.com

Single Carrier Example: www.uhone.com/Quote/QuotePerson.aspx

*If individual's employer offers Health Reimbursement Arrangement (HRA), individual can get reimbursed tax-free for individual premiums (i.e. defined contribution).

Overview of Private Health Exchanges

Review - A Private Health Exchange is Nothing New

A private health exchange is a broker's (or insurer's) insurance offering...

Some firms have created new web-based technology to automate the four key components, but online automation is not required.

E.g. A 1-man-shop could run a private health exchange via phone and email

If you want to automate the process, you can license new web-based technology.

4 Key Components of a Health Insurance Exchange

A Private Health Exchange typically includes:

1. Choice of Two or More Major Medical Health Plans

2. Health Insurance Advice and Recommendation Support

3. Automatic Billing

4. On-going Support

1. Choice of Two or More Major Medical Health Plans

Individual health insurance market private exchanges typically offer multiple carriers

Group health insurance market private exchanges typically only offer one carrier due to adverse selection (i.e. one carrier may get the “good” health, while the other carrier attracts the “bad” health).

The exchange may also include supplemental plans.

The plan comparisons can be provided via any of the following mediums:

● In-person via paper/voice● Online website / Quote engine tool● Email/chat● Telephone

2. Health Insurance Advice and Recommendation Support

Private health exchanges give advice to the consumer regarding what major medical health plan(s) and/or supplemental plan(s) best fits their needs. The following methods are often used to gather information:

● Forms to collect personal data (e.g. gender, family size, age, etc.)

● Survey to collect risk tolerance

● Review of previous claims history and pre-existing medical conditions

The advice and recommendation support can be provided via any of the following mediums:

● In-person via paper/voice

● Online website / Quote engine tool

● Email/chat

● Telephone

3. Automatic Billing

Private health exchanges provide a way for the consumer to purchase health insurance coverage, regardless of whether the coverage is paid for by an employer or paid for by an individual.

Two ways to bill coverage:

● Individual basis. Consumers pay for coverage out-of-pocket via an online payment system allowing credit/debit cards or auto-payment from a bank account.

● Employer basis. Employer pays for all employees' coverage via check or an online payment system.

4. On-going Support

Private health exchanges provide ongoing support for consumers with questions about the health coverage they have purchased through the private exchange.

These services may include:

● Phone Support● Email/Chat Support● Web Support● In-person Support

How to Offer an Individual Private Health Exchange

To offer an Individual Market Private Health Exchange, sell individual health insurance.

Call your individual services a "private health exchange".

For single carrier quoting, using a single carrier broker link.

For multiple carrier quoting, use multiple carrier broker links or quote engine (e.g. norvax.com).

Sample Private Individual Health Exchange w/ Defined Contribution

How to Offer a Group Market Private Health Exchange

To offer a Group Market Private Health Exchange, contact your group carriers and ask if they have a private health exchange product available.

If so, start selling it.

If not, work with the carrier to re-brand an existing multi-plan "cafeteria" offering as a group private health exchange.

The Future of Private Health Exchanges post-2014

As long as health insurance can be sold outside of public exchanges, private health insurance exchanges will exist....

Overview of Public Health Insurance Exchanges

Public Health Insurance Exchanges

In 2014, PPACA requires all U.S. states to create two types of exchanges:

1. American Health Benefit Exchange ("AHBE") - An Individual Exchange

2. Small Business Health Options Program ("SHOP") - A Group Exchange for Employers with < 101 EEs with multi-carrier option

(Same Core Components as Private Exchanges)

SPECIAL INCENTIVE: Massive tax credits* will be available for people earning up to 400% of the FPL (majority of Americans).

Individuals can only access the premium tax credits through the public AHBE exchange.

(Requires Business to Drop Coverage)

*There is also a Small Business Tax Credit available in SHOP

Household Income & Size are Key Variables for Individuals

Tax credit calculator coming soon at

http://navigator.zanebenefits.com

Household Size 100% of FPL 400% of FPL Premium Cap Range

1 $11,490 $45,960 $0 - $363.85 / mo

2 $15,510 $62,040 $0 - $491.15 / mo

3 $19,530 $78,120 $0 - $618.45 / mo

4 $23,550 $94,200 $0 - $745.75 / mo

5 $27,570 $110,280 $0 - $873.05 / mo

6 $31,590 $126,360 $0 - $1,000.35 / mo

7 $35,610 $142,440 $0 - $1,127.65 / mo

8 $39,630 $158,520 $0 - $1,254.95 / mo

2013 FPL Guidelines

Average Group Single Premium in 2011 was:

$435.17

Average Employee +1 Premium in 2011 was:

$860.75

Average Group Family of 4 Premium in 2011 was:

$1251.83

Premium Tax Issues in the Public AHBE Exchange

(1) Government-subsidized portion of medical premiums (if applicable) is not tax deductible

● See PPACA Section 1401 adding Section 36(B)(g) to Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986

"(g) Credit for Health Insurance Premiums- No deduction shall be allowed for the portion of the premiums paid by the taxpayer for coverage of 1 or more individuals under a qualified health plan which is equal to the amount of the credit determined for the taxable year under section 36B(a) with respect to such premiums")

(2) Unsubsidized portion of medical premiums are tax deductible. However, plans in AHBE exchanges are not qualified benefit under Section 125

● See PPACA Section 1515 "OFFERING OF EXCHANGE-PARTICIPATING QUALIFIED HEALTH PLANS THROUGH CAFETERIA PLANS."

The Section 125 exclusion does not apply to:1. HRA premium reimbursements for unsubsidized portion2. HSA (e.g. when unemployed) premium reimbursements for unsubsidized

portion3. 1040 Schedule A deduction for premium expenses over 10% of income

Public Administrative Issues

Tax Credit Administration

● Eligibility● Amount● Advanced Payment

Enrollment Periods

● Initial Enrollment Period, October 1st, 2013 - March 31st, 2014● Annual Enrollment Periods, October 15th - December 7th● Special Enrollment Periods, similar to cafeteria plan rules

Navigators...

What is a Navigator?

The Affordable Care Act requires public exchanges to establish a “navigator” program to help individuals purchase coverage in the exchange.

To be eligible to receive navigator grants, an entity must:

1. Already have relationships with employers, individuals

2. Be capable of performing the duties of a navigator

3. Meet standards established by the Secretary of HHS

4. Deliver fair and impartial information

Health insurance agents or brokers can be a navigators, however there are restrictions on compensation directly from insurers.

Coordination between Private and Public Exchanges

Final exchange regulations enable States to allow agents and brokers that operate a “web-based entity” to sell individuals health plans offered on the “public” exchange...qualifying individuals may use subsidies for this purchase.

However, integration will be complex.

If a State chooses to work with a web-based entity, the entity must:

● Make sure that the individual completes a single, streamlined eligibility verification and enrollment application through the “public” Exchange

● Provide consumers the ability to view all plans offered through the “public” Exchange● Provide standardized comparative information on each available QHP● Allow consumers to go directly to the “public” Exchange’s web site if they choose

State exchanges will determine how brokers can be compensated for bringing business to exchanges.

Summary/Next Steps

Summary/Next Steps

Summary

● A Health Insurance Exchange is a concept (not a product)● The real "product" is health insurance● There are two core types of health insurance exchanges (individual-

market and group-market)● Public Exchanges have major advantage over Private Exchanges due

to tax credits

Next Steps:

1. Watch for new webinars on AHBE and SHOP exchanges

The ZaneHRA Software provides a 100% paperless administration experience to employers and insurance professionals that want to offer better health benefits without a traditional group health insurance plan at lower costs. For more information about ZaneHRA, check out our Software.

Employers use ZaneHRA to open and manage their own stand-alone HRA or defined contribution health plan completely online, electronically enroll participants and print welcome kits, and monitor expenses and reimbursements in real-time.

Employees obtain their own individual health policies from a designated health insurance broker (see below), submit premium and medical expenses online, via fax, or mail, and receive same-day reimbursement via check, payroll addition, or direct deposit. Zane Benefits does not sell health insurance.

Insurance Professionals partner with Zane Benefits and use ZaneHRA to provide clients with a cost-saving health benefits option. Insurance brokers earn compensation on ZaneHRA referrals and retain 100% of the health insurance compensation from carriers. ZaneHRA is distributed by leading health insurance carriers, agencies, brokers, and accountants.

DISCLAIMERThe information provided herein by Zane Benefits is general in nature and should not be relied on for commercial decisions without conducting independent review and analysis and discussing alternatives with legal, accounting, and insurance advisors. Furthermore, health insurance regulations differ in each state; information provided does not apply to any specific U.S. state except where noted. See a licensed agent for detailed information on your state. www.ZaneBenefits.com

For additional resources on Health Care Reform, visit

www.zanebenefits.com/blog