How Are Private Exchanges Affecting Contractors?
Is your HVAC business looking for a way to reduce employee benefits cost? If so, you’re not alone. Many contractors are seeking ways to continue offering comprehensive health insurance at a lower overall cost to their workers, and many are turning to private exchanges. However, what exactly is a private exchange, and would it make sense for your business?
WHAT IS A PRIVATE EXCHANGE?
Unlike group health insurance plans that often provide a one-size-fits-some solution, private exchanges offer employers and employees greater choice, typically at more affordable rates. Similar to the public exchange established by the Affordable Care Act, private exchanges allow individuals to pick the plan that best suits their needs.
HOW DO PRIVATE EXCHANGES BENEFIT CONTRACTOR BUSINESSES?
The private exchange insurance model benefits employers and businesses in a number of ways:
• Affordable costs:By allowing employees to choose the level of coverage that works best for their health and budget, employers can reduce costs by offering coverage options without unnecessary, expensive benefits.
• Reduced paperwork:If your business is overwhelmed by the paperwork associated with the employer-sponsored coverage, a private exchange may be your best bet. More of a self-service model for employees, private exchanges reduce much of the administrative burden associated with offering benefits, leaving your HR team with time to focus on other tasks.
• Negating Cadillac tax concerns:Beginning in 2018, employers who provide “high-cost” health insurance to their employees — currently $10,200 annually for individuals and $27,500 for families — will be subject to a 40 percent tax on any amount that exceeds the aforementioned limits. By opting to offer health insurance through a private exchange model, employers may be able to sidestep the Cadillac tax altogether.
HOW DO PRIVATE EXCHANGES BENEFIT EMPLOYEES?
Private exchanges aren’t just good for employers. They also offer employees a number of benefits:
• More choices: In a group health insurance model, employees typically have one or two plans from which to choose. In a private exchange model, employees usually have access to a much larger number of plans. This means an employee with chronic health issues can select a more comprehensive plan, while a young and healthy employee can opt for a plan that covers the basics.
• Cost savings:More choice means more cost control. Because employees can easily compare coverage and costs from a variety of plans, they can do a better job of selecting the plan that best meets their health needs and budget without having to pay for coverage they won’t use.
A VIABLE ALTERNATIVE TO GROUP HEALTH PLANS
Clearly, private exchanges offer contractors a viable alternative to standard group health insurance. For employers, they lower costs, reduce administrative tasks, and help avoid the upcoming Cadillac tax. For employees, they provide greater choice at a more budget-friendly price. Still not sure if a private exchange is right for your business? It may be worth having a conversation with a trusted insurance agent to explore your options.
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