Following a national trend, the North Carolina Chamber of Commerce in January will begin offering businesses an opportunity to reduce the cost of employee health benefits through a private exchange.
The private exchange will allow employers to work around the coverage mandates of the federal Affordable Care Act, aka Obamacare, by letting employees select the coverage they wish to purchase. Rather than providing traditional, one-size-fits all defined-benefit insurance plans, employers would give employees a fixed amount of money (a defined contribution) to purchase the coverage they choose through the exchange.
“We expect around the first week of November of this year folks can actually go online and get quotes,” said Jim Simpson, the Chamber’s chief operating officer. The portal is not restricted to Chamber members.
Businesses of any size, along with individuals, can participate in the Chamber’s program, which will be administered by Minneapolis, Minn.-based CieloStar, a human resources and business services firm with 25 years’ experience in health care marketplaces.
“Think of it as more of an online tool that actually facilitates the purchase of insurance between the insurance carriers and the consumers,” Simpson said. “CieloStar has that tool built, and has had it since the late 1980s, and that’s why we chose them as the strategic partner.”
Planning the project and negotiating with vendors began about a year ago. North Carolina Chamber Services, which is the Chamber’s for-profit subsidiary, will market the CieloStar platform through the Chamber’s name and receive “a small revenue share” from commissions, Simpson said.
While Simpson said some Chamber members have shown an interest in exploring the private exchange, “at this point almost all the major medical carriers in this state are still waiting for the Department of Insurance to approve some of the plans that they presented to be starting in 2014.” Once approved, those rate plans will be loaded into the system.
The Chamber will focus on insurers with “the biggest footprint in North Carolina,” Simpson said, “but I can’t imagine a reason to turn down any of them if they said they want to be on this exchange.”
During a Thursday health care conference the Chamber hosted at the Chapel Hill Sheraton, John Reynolds, CieloStar CEO, said “private exchanges are one of the areas that are expected to be growing at a much accelerated pace” as the health care market transforms.
The public debate around private and public health exchanges “is changing behaviors, and it is increasing expectations for individuals about the level of choice that they’re going to have relative to benefits going forward,” Reynolds said
The state and federal public exchanges set up to sell insurance plans that comply with Obamacare offer only major medical plans.
The CieloStar private exchange “is going to offer all benefit types — major medical, vision, dental, life, disability, etc. — so it’s a single place to come for all aspects of benefits,” Reynolds said.
The vast majority of employer-provided health insurance follows a defined-benefit model, with employees paying premiums for a group policy that provides the same coverage for everyone in the group (typically every worker in the company who signs up for health insurance).
Reynolds said nearly 70 percent of employers are considering a shift to the defined-contribution model.
“The movement toward private exchanges … is a way to facilitate to defined contribution in an easy way,” Reynolds said. “The economics are very compelling as a means of controlling exposure to the ongoing health care inflation.”
“I’m very bullish on private exchanges,” said Chris Condeluci, an employee benefits and tax policy attorney with Venable LLP in Washington, D.C.
“The shift is occurring, and, I think, will continue to occur for both the large guys as well as the small to mid-size guys,” Condeluci said.
Condeluci, a tax counsel for the Senate Finance Committee from 2007-10 who helped draft the legislation that eventually became Obamacare, believes there are good, bad, and ugly components of the law and the health care exchanges.
“This marketplace idea has been around for 40 years. It’s not really a new concept,” he said.
The Clinton administration and the Heritage Foundation embraced the concept, as did the policy experts who drafted the Affordable Care Act, believing it would stimulate competition, reduce insurance costs, and cut administrative expenses.
“We actually looked at private exchanges to serve as the model for the exchanges under this law,” Condeluci said. But once the “debate went partisan,” and staffers for the late Sen. Ted Kennedy, D-Mass., took the lead in the design of the Obamacare exchange, it became “much more regulatory than what in my opinion a private exchange would ever be,” Condeluci said.
“We’re already seeing the problems of the manner in which the ACA exchange was developed. Instead of building off of private business and not recreating the wheel, this administration did recreate the wheel, and arguably we’re seeing symptoms of people not talking to each other, we’re seeing functionality problems, etc.,” Condeluci said.
North Carolina Chamber members voiced grave concerns about the confusion inherent in Obamacare, energizing the private exchange plan.
Simpson said there are advantages to an employer using the private exchange. With the defined-contribution model, employers will be able “for the first time in perhaps many, many years” to control the unpredictable costs that occur under defined-benefit plans.
Under defined-benefit plans, employers “simply wait for their agent to come back with a series of quotes to figure out how much more [coverage] is going to cost” each year, Simpson said.
“There are certain rules tied to the Affordable Care Act about minimum thresholds of coverage and percentages that [employers must] provide in terms of coverage of care [for policies on a private exchange] to be ACA-compliant,” Simpson said.
Once those standards are met, he said, year-over-year increases in employers’ health-insurance costs should be much lower than they have been in the small-group market.
Simpson said access to private exchanges may bring some of the benefits ans cost savings now available only to large companies to their mid-size and smaller counterparts.
Dan E. Way (@danway_carolina) is an associate editor of Carolina Journal.