NCPA - National Center for Policy Analysis

Could Private Exchanges Save Health Care?

May 6, 2015

For many years, employers have struggled with providing health insurance to workers and their families. Competing for high-skilled workers typically requires offering fairly comprehensive benefits (valued at an average of $6,000 for an individual in 2014). Public-sector employers — states and municipalities — are often hemmed in by the old politics of powerful public-sector unions. Not surprisingly, their negotiated benefits are also routinely comprehensive and costly.

Nevertheless, employer-sponsored coverage will change in 2018. Obamacare's "Cadillac Tax" — a 40 percent excise tax on all plans above a specified amount — will make these plans even more expensive. One safety valve, for both private and public employers, may be a new approach to employer-sponsored coverage: privately run health-insurance exchanges.

  • A private exchange is a marketplace for private health plans. It enables workers to choose different health plans, weighing alternatives and balancing their costs and benefits.
  • In a private exchange, an employer can make a defined contribution to a tax-free group plan chosen by the worker. If the worker purchases a less expensive plan, the worker can keep the difference in savings.
  • In a well-run private exchange, self-insured employers can offer greater flexibility in benefit design, allowing workers and their families choice among a variety of health plans offered by multiple carriers.

Real choice and genuine market competition could spark the real health care change America has been waiting for — for far too long.

Source: Robert Emmet Moffit, "A Health Care Revolution on Private Exchanges?" Real Clear Policy, May 4, 2015. 


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