It turns out employers are pretty excited about the possible benefits of health insurance exchanges — just not the ones set up by the federal government.
Private insurance exchanges are becoming increasingly popular among employers who want to continue providing health benefits but are tired of the hassle that comes with doing so, said Mark Whiting, a principal at Mercer.
According to the company’s recent employer survey of about 2,600 employers, 25 percent of companies say they will move to a private exchange in the next two years and 45 percent said they would do so within five years.
This year, Mercer announced it has nearly five times the number of companies participating on its private exchanges compared with last year.
Private exchanges are similar to the public ones set up by the federal government through the Affordable Care Act. Individuals can receive a contribution from their employer to help subsidize the cost of the plan, which is administered by Mercer or a similar company. Employees then go to an Amazon-style website where they can view a wide range of plans, carriers and types of insurance.
Many offer tools to help consumers assess their needs and narrow down the plans to those that make the most sense for them.
The public exchanges are designed for individuals and very small companies, Whiting said. Today, private exchanges make it possible for companies to offer similar services.
Whiting said employers on Mercer’s exchange said the biggest reason they made the switch was being able to hand over administration duties.
“As plans get more and more complex to administer, people were getting overwhelmed with it and said if I can move off of the daily administration and move back to my core services that I need to provide, then that will help me,” he said.
Another big motivator is being able to move to a defined contribution, Whiting said. Employers are able to set their costs and plan for predictable growth. Even if the costs of health care rise, their contribution can stay the same or increase at a planned rate.
Employees also generally have access to a wider range of plans and are able to pick one that best fits their needs.
Whiting said the actuarial value of plans employees purchased dropped from about 80 percent to 72 percent after moving onto the private exchanges. In other words, they were selecting plans that had fewer benefits, not more.
That could be because employers were offering smaller contributions to cover the costs, but Whiting said he believes that employees are “right sizing” their benefits plans.
“People bought down and said, ‘I can win by doing some right-sizing,'” he said. “They think, ‘I’m over-insured and paying too much money for this.'”
The draw-backs include some initial fees and higher commissions that account for taking over administration duties, as well as a lengthy start-up process.
“The implementation of putting everything in place with the backroom administrator and all the plans and so forth, that implementation period takes a lot of time to get right,” Whiting said.
The biggest thing holding companies back?
“I think the biggest one is clearly just inertia and fear of something that’s new,” Whiting said.
Date: December 1, 2014