Could private health care exchanges similar to those operating in the United States be making their way into Canada? The answer is maybe. Industry representatives say some are exploring the viability of private health care exchanges in Canada. Here’s a little background.
What is a private exchange?
It’s different from the public exchanges created under the Affordable Care Act in the United States. Public exchanges are marketplaces run by the U.S. federal government or states and are for those without employer-sponsored insurance. Many who buy insurance through them may be eligible for a premium subsidy or tax credit based on their income.
Private exchanges, however, are run by benefit consultants or brokerages. Instead of contracting with a health insurance company that might provide a few plan design options to employees, an employer contracts with the exchange, where employees can choose a health care plan they think is best for them. Employers may continue to pay a portion of health care costs, and many provide employees with a fixed contribution allowing employees to choose how they want to spend the money on the private exchange. Most of the exchanges offer plans from multiple insurers. Employees might choose a high-deductible plan with lower premiums and use any remaining money to buy vision or life insurance through the exchange.
Some large U.S. employers, such as retailer Sears, have shifted health care coverage to private exchanges for their active employees. Others, including IBM, have shifted retiree health care coverage to private exchanges.
A recent report from Accenture estimated that 6 million people enrolled for 2015 employer-sponsored health care through private health insurance exchanges in the United States, nearly double the number that enrolled in 2014.
[Related: Sustainability of the Canadian Health Care System]
Why would anyone want an exchange in Canada, where health care is publicly funded?
Health insurers and consultants I talked to had varying opinions on whether there is an interest or a market for private exchanges in Canada given the difference between the two health care systems.
One consultant said there is growing interest in Canada, particularly for retiree health care coverage. Most employers would rather not get into providing coverage, so a private exchange may be a viable alternative. There are some consultants looking into this and some plan sponsors and health and welfare trusts that are interested.
But for active employees, the consultant indicated there isn’t much movement. Employers tend to be paternalistic and conservative, plus the Canadian health insurance marketplace doesn’t have as many players as the U.S. marketplace.
There might be some resistance among active employees for an exchange because they prefer having a known set of benefits rather than set funding with which to select them, another industry representative said.
It will be interesting to watch whether private exchanges gain a foothold in Canada.
Join us in Las Vegas, Nevada, November 22-25 for the
48th Annual Canadian Employee Benefits Conference.
Kathy Bergstrom
Editor, Publications at the International Foundation
