Health Reform WK-EDGE Private exchanges may have insignificant impact on SHOP marketplaces
Wednesday, May 25, 2016

Private exchanges may have insignificant impact on SHOP marketplaces

By Wolters Kluwer Editorial Staff

It is unlikely that private exchanges will have a significant impact on the Patient Protection and Affordable Care Act’s (ACA’s) SHOP Marketplaces, according to findings by RAND Corporation, after discussions with private exchange operators, insurers, and other experts. Although many respondents thought private exchanges could serve as a mechanism for avoiding the ACA’s 40% Cadillac tax, RAND has proposed that the tax could also be avoided by reducing plan generosity or making other changes to benefit design.

The authors of a research report based on the findings also discovered that private exchanges might encourage employees to select less generous plans, thus exposing them to higher out-of-pocket costs. The up side of this is that premium contributions would, of course, decrease, resulting in a net decrease in employee spending. Conversely, if employers decrease their health insurance contributions during a move to private exchanges, employee spending may increase.

The report was drafted at the request of the HHS, to discover the current state of the private exchange market and how it might affect the SHOP Marketplaces. The authors report that, while participation in the SHOP Marketplaces has, to date, been low, it is not clear that private exchanges have contributed to low enrollment.

The authors of the report pointed out that it has been theorized that private exchanges might reduce costs by encouraging competition among carriers and increasing employers’ negotiating power. RAND points out, however, that these theories have not been confirmed with any kind of empirical analysis.

Companies: RAND Corporation

IndustryNews: NewsStory SHOPNews

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