Investors are eyeing an opportunity as companies find new ways to provide health insurance to their workers and retirees, but picking the next stocks to pop in that trend is easier said than done.
The potential of the trend toward private health exchanges was underscored this week by an IPO that saw its shares go through the roof, and disclosures that yet another large company was moving workers to such an exchange.
Benefitfocus, a newly public software solutions company specializing in benefits and private exchange platforms, saw its share price explode Wednesday from an opening of $26.50 to a close of $53.55—a 102 percent spike—in its first day of trading on Nasdaq.
That dramatic debut came on the heels of the day’s earlier news that retailer Walgreen will send up to 160,000 active employees into a private health exchange run by Aon—which has signed up 18 employers this year.
Two weeks ago, news broke that IBM was shifting 110,000 retirees into a Medicare private exchange run by Towers Watson’s ExtendHealth division, which already has about 300 companies as clients. Towers Watson’s exchange primarily handles retirees but expects to soon sign up several big companies for active workers. Days later, Time Warner revealed it also would direct retirees to an exchange to get health coverage.
Private health exchanges offer multiple competing insurance plans, at different levels of premium and out-of-pocket costs, to workers, who usually are given cash by their employer to offset the purchase price. The online exchanges give employees increased options to meet their individual insurance needs and shift some of the cost and administrative burden from employers to workers.
Date: September 19, 2013