If you think private healthcare exchanges are the cutting-edge solution to rising healthcare costs, think again. In reality, they are essentially a clone of the cafeteria-style benefit plans that date back to the 1970s. The main difference is the technology used to select and implement employee benefits.
Simply put, here's how a private exchange works: employers or exchange sponsors offer a package of coverage choices, define a contribution amount that acts as the employee's budget, and the employee selects how to allocate their budget dollars.
This basic process may seem like the answer to today's healthcare woes for both employees and employers. However, there are some important realities employers need to know about when it comes to providing healthcare through a private exchange.