Robert Moffit explains for the Daily Signal how private-sector actors can help “spark a health care revolution.”
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.
But 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. By contrast, the minority of employers who offer a choice today provide a limited range of options, typically two or three plans. The plans are often offered by the same carrier with the same provider networks, with no opportunity to make meaningful comparisons among formularies, physician networks, or the total costs.
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. A worker who wants a more expensive plan can top off the employer’s contribution with her own money.
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. With cost calculators, plan and provider performance ratings, and easily accessible network and formulary information, workers are suddenly empowered to make well-informed health care decisions. In the style of 401(k) pensions, the private exchange could emerge as the transformative platform for a revolution in health care financing.
