Q: My health insurance options from my employer are on an exchange. Is this part of Obamacare?
A: It could be, or it could be a private exchange. The state health insurance exchanges were developed as part of the Affordable Care Act, or Obamacare, and began operating in 2014 (Massachusetts and Utah have exchanges that pre-date the ACA).
If your employer has purchased coverage through the SHOP exchange in your state, it’s an exchange established under Obamacare. There’s just one in each state, although some are run by the state while others are run by the federal government at Healthcare.gov. In 2015, these exchanges offer coverage to businesses with up to 50 full-time equivalent (FTE) employees.
The original plan was for employers with up to 100 employees to gain access to the SHOP exchanges starting in 2016, because the definition of “small group” was expanding to incorporate businesses with 51 – 100 FTE employees. But on October 7, 2015, President Obama signed HR1624 into law, thus keeping the definition of “small group” at businesses with up to 50 FTE employees. That means health plans for mid-size businesses with 51 – 100 FTE employees will not have to comply with the ACA’s mandates for small group plans. States now have the option to expand the definition of “small group” to include firms with 51 – 100 FTE employees, but they are not required to do so. Groups of that size will only be able to purchase coverage through the SHOP exchange if the state decides to designate those groups as “small.”
There are also private exchanges available for employers to use, although ACA tax credits for small businesses are not available through private exchanges. Most private exchanges are operated by benefits consulting firms, insurance companies or health plans. Your employer can contract with one of these organizations, which provides access to an exchange website, customer support and other administrative support. The private exchange may offer health insurance options from one or several companies.
In employer health insurance exchanges, you may also be hearing about a shift from “defined benefit” to “defined contribution.” Under a defined benefit scenario, an employer offers one or two options to all employees and generally pays the bulk of the associated costs (pre-ACA, this was generally the norm). Under a defined contribution scenario, the employer contributes a set amount of money for each employee, and offers a wider range of health insurance options. SHOP exchanges were created with the concept of defined contribution and employee choice, although that was delayed in many states until 2016.
Under a defined contribution “employee choice” model, the employee picks any available plan and uses the employer contribution to fund it. The amount that the employer contributes is pre-determined, but the employee can pay a higher premium to get a more robust plan, or can save even more money by selecting a lower-cost plan. The employees have a wide range of choices, while the employer had a predictable premium contribution from one month to the next.
Private exchanges have been available for a few years, but enrollment has been somewhat lackluster thus far. SHOP exchanges faced several operational delays and enrollment has also been low nationwide through 2015.