North Carolina will soon have a pair of private insurance exchanges on which residents will be able to shop online for individual health insurance plans rather than going through an insurance agent or customer service rep.
The N.C. Chamber, the state’s business lobby, and Digital Benefit Advisors, a national consulting company, both plan to launch online insurance marketplaces next month. The websites are primarily designed as an online insurance shopping mall for employees, but they will be accessible to the public as well.
Businesses are increasingly turning to insurance exchanges as an alternative to conventional insurance packages that offer limited benefits for workers. With an exchange, a company provides employees with a cash allowance and lets the workers choose from a menu of insurance options.
Private exchanges are suddenly in vogue, offered to hundreds of companies nationwide by benefits consulting giants such as Aon Hewitt, Towers Watson and Mercer. Employers are opting for insurance exchanges as a way of capping their health care costs by setting an annual allowance and leaving the remainder of medical costs to be paid by the employees.
These exchanges are sometimes compared to the federal insurance marketplace created by the Affordable Care Act, except that private exchanges are not authorized to sell federally subsidized insurance.
But private exchanges differ in another important way: They typically limit employees to a single health insurer, rather than several insurers. For example, the N.C. Chamber’s exchange will continue with Blue Cross Blue Shield for its 23 employees, the same insurer the Chamber has offered its staff for years.
The N.C. Chamber will open the insurance exchange, to be called the N.C. Chamber MarketPlace, to companies throughout the state to offer to their workers.
North Carolina companies that opt to sign up with Digital Benefits Advisors will also select a single insurance company for their employees. Wally Dawson, a Raleigh managing principal with the company, said employees still benefit from a wider range of plans.
“The companies are the ones who select the options they want their employees to have,” Dawson said. “But you’ll see multiple options within that insurer. In our exchange, Blue Cross Blue Shield could have 18 to 25 different products.”
For employees, the appeal of a private exchange will be the ability to use the company’s cash allowance to offset the cost of buying insurance. Otherwise, employees could shop on their own with any insurance company that sells policies here.
Experts have noted that if employers reduce insurance allowances over time in a bid to save overhead, their workers will have little incentive to shop on private exchanges, with more options available on the free market. For example, North Carolina has approved nine companies to sell individual insurance, but not all nine operate in every county.
“The private exchange idea is not a new one,” said Mark Hall, a professor of law and public health at Wake Forest University. “We’ve seen this is various forms in the past, and they’ve usually faded out for one reason or another.”
In addition to a single health insurer, the exchanges offer insurance for dental, vision, disability and other coverage options.
The N.C. Chamber’s exchange will be the first in North Carolina run by CieloStar, a Minnesota company that currently has 750,000 people covered through its exchanges nationwide. CieloStar collects a commission for every policy sold over its exchanges, said CEO John Reynolds.
“Think of it purely as an electronic marketplace,” Reynolds said.
The N.C. Chamber’s current health plan covers 100 percent of employee premiums and provides employees a $2,000 subsidy for deductibles, said chief operating officer Jim Simpson. The chamber hasn’t decided how it will subsidize health insurance for its employees in 2014 under the CieloStar exchange, he said.
Digital Benefit Advisors will design an insurance exchange for each company that participates, Dawson said. It will charge between $3.50 and $5 per employee per month for the service of administering the benefits and enrolling a company’s employees.
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