Employer Interest in Private Health Exchanges for Workers on the Rise

Posted on Monday, June 10, 2019

Employers are showing more and more interest in private health insurance exchanges, according to one recent survey.* These private exchanges are online marketplaces for major medical insurance plans as well as other types of ancillary insurance. They may be created by an insurance carrier, an industry group or a technology or marketing company which in turn sells access to customers accessing their benefits via this particular portal.

Employers are finding these exchanges attractive because they facilitate migration to a cost-saving defined contribution model for paying for health insurance benefits. For example, by going through a private exchange, an employer may be able to achieve a number of benefits:

Reduced administrative overhead
Access to more and better plans and products
Economies of scale
More flexibility with cost sharing with employees
Protection from future premium increases

Here are some of the survey's key findings:

Plan sponsors are expressing more interest in 'defined contribution' type health insurance models that lessen their exposure to future rate hikes.
Only about 20 percent of employers surveyed report that they plan to move all employees to a pure defined contribution arrangement that totally separates the plan sponsor from any input into plan selection.
Most employers surveyed report that they will be moving their business to exchanges with multiple carriers, offering more choices for employees. A little under 30 percent report they would be more interested in an exchange featuring plans from a single carrier.
A strong majority - 70 to 80 percent of employers - prefer doing business with a private health insurance exchange rather than from a government-designed exchange. The reasons cited include better choices, more access to ancillary types of coverage that their employees want, the ease with which plans can be customized, better customer services, and a general distaste for government meddling in private sector affairs.
Consumers like to have recognizable brand names as payors - but they don't differentiate much between them. The payor doesn't matter so long as the brand name is familiar.
Nearly all respondents report that cost is a major factor in their health care benefits decision-making process.
Most consumers value having some advice in the picture. The majority responding to the survey indicated they want a "guided" purchasing experience. They also value specific advice and recommendations.

Other surveys indicated that 65 percent of employees are planning to exclude part-timers from plans purchased via government exchanges.

Best Practices

This is a time of great transition for workers, as well as employers. To get the most value out of a competitive health insurance plan, employers should be proactive about communicating plan benefits to employers, and how their plans may be changing and why.

Employers should prepare their work forces to expect some increases in out-of-pocket premiums, deductibles, co-pays and the like. However, by using private exchanges, employers have a positive story to tell, too, including more flexibility for employees and access to more plans and more choices.


 

*Survey by Strategy&, formerly known as Booz & Company, a global management consulting firm.

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