Private health care exchanges bring with them major implications for employer-sponsored benefits, including a shift to defined contribution health care and increased access to data.
A recent report from the Kaiser Family Foundation says that private exchanges have the potential to reshape employer-sponsored health insurance, which covers nearly 56% of the U.S. non-elderly population.
Kaiser estimates that at least 2.5 million people enrolled through private exchanges in 2014, including 1.7 million group enrollees. Further, they found that 13% of employers with 200 or more workers who currently do not offer benefits through an exchange were considering such an approach. While “we don’t totally know what is going to happen with them,†Kaiser Senior Policy Analyst Matthew Rae says there was new exchanges in 2014 and even more expected moving forward.
Among those emerging implications are:
- 1. Shift to defined contribution — Kaiser says that by “facilitating a shift to defined contribution through a fixed dollar benefit, private exchanges offer the potential for cost stability to employers, while giving greater choice to employees (albeit with greater financial risk as well.)†While employees have greater risk, they also have more control over how to allocate their benefit dollars between medical and ancillary plans. Kaiser says that interviews with exchange sponsors indicate that of active group lives using private exchanges, at least half are using a DC model
- 2. Shift back to fully insured for large employers — several private exchanges require large employers move to fully-insured to join the exchange, including Aon. A shift to fully-insured places the risk with insurers instead of employers, which is financially beneficial to the carriers who provide the product, Kaiser says.
- 3. Increased access to data — a private exchange is the “connecting point†for employers, employees and carriers, and they have the ability to aggregate data that is traditionally difficult to access, Kaiser says. “A well-performing exchange should be able to show the choices employees are making in plans, how the health status of the overall workforce is changing and whether the promised savings are being realized,†says Cathy Tripp, director of Towers Watson OneExchange in the Kaiser report.
The future
While private exchanges continue to change the health landscape, not all employers are looking at them, Kaiser’s Rae says. “It depends on how happy the firm is with its current plan and how happy their employees are with plan offerings,†he explains. “…If you offer a plan and employees like it, that sounds like a reason not to mess around with it,†assuming it is compliant with new regulations of the Affordable Care Act.
While Rae says that, unsurprisingly, all exchanges are predicting large growth in the future, “that is possible but we don’t know. … We don’t know if this is going to consume the market or just be a new [tool] and employers keep doing what they are doing.â€
