Employers across a wide spectrum of sizes and industries are exploring private exchanges, where workers shop for their own health plans and can select one that fits their medical needs and their household budget.
Private exchanges are offered by health insurers such as Aetna, Horizon Blue Cross Blue Shield of New Jersey and AmeriHealth New Jersey; by benefits consultants like Mercer and by the private exchange specialist Liazon.
A private exchange may be a “defined benefit” plan in which the employer gives workers an allowance to shop for a health plan. Workers who want extended benefits can then “buy up” using their own money for a richer suite of coverage. Private exchanges are a diverse, flexible marketplace: Some offer plans from just one insurer, other sell plans from various insurers, and the choices can include self-insured plans.
“The interest in private exchanges is like nothing we’ve seen in recent memory,” said Eric Grossman, exchange business leader for Mercer’s health and benefits business. The company launched its Mercer Marketplace private exchange for the 2014 health plan year and has so far signed up 90 employers with 290,000 lives. Mercer, which offers plans from 30 insurance companies, has members in New Jersey, but doesn’t report enrollment by state.
Horizon launched its HorizonSelect private exchange in the spring of 2013 and it has been very well received, according to spokesman Tom Vincz. Horizon declined to provide enrollment figures, but said they are up six-fold since the launch last year.
“Business clients range from 40 employees to 1,000 employees, and are located in multiple regions throughout the state and are engaged in multiple industries,” Vincz said.
Grossman said Mercer Marketplace employers on average have lowered their annual medical cost by $800 per employee. About 70 percent of the savings went to the employers, while the rest benefited employees through lower contributions to their health plan.
“Most of that cost saving is coming from helping employees recognize that in many cases they have been over-insured,” Grossman said. “We help them to right-size their coverage to more appropriate levels.”
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Often employees cut their premiums by selecting a higher deductible plan, which potentially will increase their out-of-pocket costs. Grossman said, “If the employees are concerned they are taking on too much risk, they can use some of their savings to buy a supplemental health policy, such as an accident insurance policy, to protect against that risk.”
Grossman said, “At the end of the day we expand choice for the employees and in many cases the best choice will be a lower and less costly level of coverage than what they have today.”
Health policy experts see private exchanges playing a key role in keeping employers in the health insurance game. The idea is that the employer’s health care costs will be more predictable, and thus make employer-sponsored health insurance more attractive going forward.
The private exchange “is an innovative product that helps businesses control their health care costs while doing right by their employees to offer health insurance coverage,” Vincz said.
Vincz said Horizon is “seeing tremendous interest and appetite for HorizonSelect in the medium to large business group markets,” and the company will hold a webinar explaining HorizonSelect on July 15. The company also created a dedicated website, ChooseHorizonSelect.com.
AmeriHealth New Jersey launched its private exchange in 2013. Mike Munoz, senior vice president, sales and marketing, said: “We are very pleased with the performance of our private exchange, MyAHNJ, to date. We aim to provide maximum choice to New Jersey businesses and their employees, and our private exchange offers employees affordable options to select the health plan that most closely matches their needs.”
The alternative for employers is to drop health coverage altogether and let workers buy their own policies on the federal government’s public exchange at HealthCare.gov, where insurers sell health plans that are subsidized by the Affordable Care Act. In its first year in New Jersey, the federal government reported that 162,000 New Jerseyans signed up for coverage at HealthCare.gov, with the majority getting federal subsidies to make that coverage more affordable.
In 2015 employers with 50 or more full-time-equivalent workers have to offer health plans or pay penalties, and employers who don’t offer health insurance lose the tax deduction for their share of the cost.
According to a survey last year by the Private Exchange Evaluation Collaborative, 45 percent of employers will either consider or actually switch to a private exchange by 2018. The collaborative is made up of four nonprofit business coalitions and PricewaterhouseCoopers, the accounting and consulting firm; PwC does not offer a private exchange.
Aetna spokeswoman Susan G. Millerick said in addition to surveys showing widespread interest in private exchanges among employers, research indicates that “the majority of surveyed employees are willing to embrace this change.” She said the trends reflect “a shift to greater consumer choice and engagement.”
She said Aetna offers plans on about 20 third-party private exchanges in addition to its own proprietary private exchange, Aetna Marketplace: “We believe private exchanges can offer significant value for both employers and consumers and we are continuing to actively participate in this growing distribution channel.”
Date: 9 July, 2014