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SEPTEMBER 25, 2014

Employers’ interest in private exchanges driven by desire to save money, encourage consumerism

ARLINGTON, Va.–(BUSINESS WIRE)–Results of a July 2014 survey of midsize to large employers by global professional services company Towers Watson (NYSE, NASDAQ:TW) showed that 28% said they had already extensively evaluated the viability of private exchanges. Nearly one in four (24%) said private exchanges could provide a viable alternative for their active full-time employees as soon as 2016.

“Private exchanges are a relatively new path for many employers — one that has only recently become available to provide benefits for active employees”

The results are from the 2014 Towers Watson Health Care Changes Ahead Survey, which was completed by 379 employee benefit professionals from a variety of industries and reflect health care benefit decisions for 2016 – 2017.

The survey also revealed that the top three factors that would cause employers to adopt a private exchange for full-time active employees are:

Evidence they can deliver greater value than their current self-managed model (64%)

Adoption of private exchanges by other large companies in their industry (34%)

An inability to stay below the excise tax ceiling as 2018 approaches (26%)

Public Exchanges Not Considered Viable for Full-Time Active Employees

In contrast, nearly all employers surveyed (99.5%) said they have no plan to exit health benefits for active employees and direct them and their families to public exchanges, with or without a financial subsidy. More than three out of four employers (77%) said they are not at all confident public exchanges will provide a viable alternative for their active full-time employees in 2015 or 2016.

“Private exchanges are a relatively new path for many employers — one that has only recently become available to provide benefits for active employees,” said Dave Osterndorf, a managing director with Towers Watson’s OneExchange. “However, with the Patient Protection and Affordable Care Act’s excise tax top of mind for large employers, and with the potential to cost companies billions of dollars unless they act now to keep the cost of health benefits below government-mandated thresholds in 2018 and beyond, new solutions are necessary. Even employers that have managed to keep increases in their health care benefit costs lower than industry averages are working very hard to maintain that success. Private exchanges offer employers a new opportunity to save on health care coverage with a reduced operational burden, which is the main reason they are more seriously evaluating them for their active employees.”

Data from the 2014 Towers Watson Health Care Changes Ahead Survey revealed that nearly three-quarters (73%) of employers said they are somewhat or very concerned they will trigger the excise tax based on their current plans and cost trajectory. More than four in 10 (43%) said avoiding the excise tax is the top priority for their health care strategies in 2015.

Osterndorf added, “Effective private exchanges can provide value in many ways. For example, as more employers move to account-based health plans, they can realize the promise of avoiding the excise tax while providing the added benefit of putting employees in charge of how their health care dollars are spent. Private exchanges offer more choice, including account-based plans, with the tools and support for helping employees make better health decisions, and recognize the connection between their physical and financial well-being. Employee understanding and engagement are critical to the long-term sustainability of an employer’s program. Private exchanges can accelerate the fulfillment of that goal.”

According to the 19th Annual Towers Watson National Business Group on Health Employer Survey on Purchasing Value in Health Care, released in March 2014, nearly three-quarters of respondents currently offer account-based health plans (ABHPs), with another 9% expecting to add one for the first time in 2015. Nearly 16% of respondents have adopted ABHPs as their only plan option, up from only 7% in 2012. Nearly one-third of all companies could offer ABHPs as their only option by 2015, if they follow through with current plans.

About the Surveys

The 2014 Towers Watson Health Care Changes Ahead Survey offers insights into the focus and timing of U.S. employers’ plans and perspectives related to their health benefits, and their efforts to better manage costs and employee engagement, as well as their planned responses to the business risks associated with the 2018 excise tax. The survey was completed during July 2014 by 379 employee benefit professionals from midsize to large companies across a variety of industries and reflects respondents’ 2014 – 2017 health care benefit decisions. The responding companies comprise a broad range of industries and business sizes, and collectively employ 8.7 million employees.

The 19th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care tracks employers’ strategies and practices, and the results of their efforts to provide and manage health benefits for their workforce. This report identifies the actions of high-performing companies, as well as current trends in the health care benefit programs of U.S. employers with at least 1,000 employees. The survey was completed by 595 employers between November 2013 and January 2014. Respondents collectively employ 11.3 million full-time employees, have 7.8 million employees enrolled in their health care programs and represent all major industry sectors.

ABOUT TOWERS WATSON

Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has more than 14,000 associates around the world and is located on the web at towerswatson.com.

 

Contacts

Media:

Towers Watson

Rob Wyse, +1-212-920-1470

rob@capital-content.com

or

Melanie Meharchand, +1-650-292-8717

melanie.meharchand@towerswatson.com

 

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