While the Department of Health and Human Services issued regulations last week to guide states in building health insurance exchanges to serve small employers starting in 2014, private exchanges targeting small, midsize and even large employers already are cropping up across the country.

This month, Minnetonka, Minn.-based Medica Health Plans and Detroit-based Blue Cross Blue Shield of Michigan launched private exchange platforms that enable employers with 50 or more employees in those states to use a defined contribution approach to fund health benefits while also giving employees access to an online marketplace of numerous health plan options.

In April, Lincolnshire, Ill.-based Aon Hewitt Inc. announced it was developing a private health insurance exchange to serve employers with 1,000 or more employees beginning in 2012.

Another independent, HealthPass New York, has been serving employers with two to 50 employees in New York since 1999.

“The whole health care reform debate has stirred the pot a bit and accelerated innovation in the private sector,” said John Naylor, vp of sales and account service at Medica.

“We've heard from health plans that they need a way to offer more customized, individually tailored benefits to their employer clients who are looking for more choice in a tough economy,” said Abir Sen, CEO of Minneapolis-based Bloom Health, which launched a private exchange platform in 2009 to allow employers to limit their health care liability while giving more choice to their employees.

“The solution is most attractive to the small- and midsized employer market,” he said.

Mr. Sen sees these private exchanges as providing an alternative to the state insurance exchanges that will be established under the Patient Protection and Affordable Care Act for employers with up to 100 employees, as well as for larger employers that will not have immediate access to those exchanges.

Employers participating in these private exchanges can determine how much they want to spend on health care benefits and then allocate those dollars on a pretax basis into a health reimbursement arrangement on behalf of each employee.

The employees then can use the funds to choose from plan options that range from a preferred provider organization plan with a low deductible to a high-deductible health plan linked to a health savings account. If the cost of the plan exceeds the defined contribution their employer allocates to them, the employee pays the difference through pretax payroll deductions like they would in a standard employer-sponsored health insurance program.

Medica's My Plan and BCBS of Michigan's GlidePath exchange also help employees decide which plans are best for them based on their responses to a questionnaire that includes a financial, health and risk tolerance assessment. Advisers also are available by phone throughout the selection process.

Since Medica's My Plan was launched June 6, two employers with 50 to 100 employees have signed up with benefit plans beginning Aug. 1. Dozens of other Minnesota employers with benefit plan years beginning after Sept. 1 are in contract talks with Medica. The employers range in size from 50 employees to “a couple of thousand,” Mr. Naylor said.

So far, one midsize employer has contracted with BCBS of Michigan, Mr. Sen said.

HealthPass provides coverage to 4,000 employer groups.