Employer-Provided Healthcare v. Defined Contributions and Private Exchanges

health benefitsThe Affordable Care Act (ACA) has left employers with big decisions regarding how to give their employees health care. The ACA provided businesses with three options when facing 2014: continue providing healthcare coverage, transition workers to the private exchanges with defined contributions, or pay a fine and drop healthcare coverage altogether. While the benefits in terms of providing a competitive package to attract new talent as well as assuring existing employees maintain their health precludes the last option, the remaining two are more difficult to choose between.

Employer-provided healthcare has been a facet of the American business sector for decades. Employers recognized early on that healthcare was a benefit to employee and employer alike. Employer-provided healthcare is a phenomenal hiring incentive. Newer generations are no longer simply considering salary when they entertain job offers. Instead, they assess the entire package that comes with working with a company. Being able to offer a plan personalized to the employees of a business is a compelling reason to accept a job at a new company.

Employer-provided healthcare allows employers to have data on employee health and determine whether healthy living initiatives in the workplace are effective. A switch to private exchanges would essentially have employers working in the dark when it comes to employee health and wellness. No longer would employers have instantaneous access to employee health data for interpretation. This divide between healthcare insurance and the actual benefits it is providing may result in employers allocating money and time to health initiatives that are ineffective or counterproductive.

Despite the drawbacks of patient data, private exchanges are tempting to employers. The headache of finding a suitable healthcare plan, providing staff to oversee its implementation, and keeping up with the constantly changing laws regarding healthcare would go away if an employer chose a private exchange. This would free up staff and money for other endeavors.

Private exchanges are also a great option for employers attempting to put a cap on healthcare spending while still providing quality healthcare to employees. The private exchanges offer multiple options for employers to choose from but they all provide at least 60 percent coverage per the requirements of the ACA. Instead of undertaking the burden of rising healthcare costs as in an employer-provided healthcare system, the private exchange moves the risk of increasing costs to the carrier.

A benefit of a private exchange for the employee is the introduction of choice in their medical coverage. While most employer-provided plans reduce the choice in healthcare down to a three-tiered system, private exchanges offer employees multiple carriers and levels of plans to best suit their needs. This ability for employees to choose a plan specific to their needs is a boon to employees and employers who may not always know the specific healthcare needs of their workers.

The ACA has opened the eyes of businessmen and employees alike to this new world of healthcare.  Weighing the pros and cons for your company is imperative to deciding whether a private exchange or employer-provided plan is best for employees and company’s health. While current and future cost do factor into which plan to choose, a complete look at a company’s commitment to health and wellness and how each plan would affect company goals is imperative.


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