Looking into the Trends and Traits of Private Insurance Exchanges
Interest in private health insurance exchanges (HIX), and the defined contribution model of health benefits delivery, appears to be growing at a meteoric rate. Enrollment this year hit 6 million — double last year’s figure, according to Accenture. The consultancy also predicts the number will rise to 40 million by 2018. In other words, more people will be enrolled in HIX than via a public Health Insurance Marketplace, such as healthcare.gov.
Skepticism on savings
Among the primary drivers of the HIX trend, survey data suggests, is employer anxiety over facing the Affordable Care Act’s (ACA’s) “Cadillac tax” in 2018.
For example, Accenture projects that 38% of employers with at least 2,500 employees will face that 40% excise tax on the value of health plan benefits exceeding ACA-defined thresholds, if they don’t take prompt steps to avoid it. Yet many employers — particularly the largest — remain skeptical that HIX will rescue them from the Cadillac tax, as well as other cost challenges that have bedeviled them for years.
Moreover, a considerable number of employers — 58%, according to the latest Healthcare Trends Institute employer survey — remain foggy on what the private insurance market is all about in the first place. HIX are essentially Web-based health plan enrollment systems for employees that are linked to one or, more typically, multiple health plan providers. Ancillary health benefits often are also available for purchase.
Some exchanges are run by consulting/outsourcing firms, and others by the health plans themselves. For instance, Aetna recently became a big player by acquiring exchange provider bswift. Aon Hewitt, another large player, combines Hewitt’s base in the benefits and HR consulting field with its corporate parent AON’s origins as a group benefits broker. Accenture’s own Health Administration Services unit provides a range of technical services to the “HIX ecosystems,” but doesn’t run its own private exchange.
The difference between the private and public marketplaces is that, with HIX, employers pay the bill — to the limit of the “defined” contribution — assuming the employer has adopted the defined contribution model. (Using HIX doesn’t require a defined contribution model, but HIX make it easy to follow one.)
Here are some highlights of recent research related to HIX and their future. A survey of its large company members by the National Business Group on Health (NBGH) last year found that:
- 36% of large employers are “considering” using HIX in 2016,
- 14% are already “partnering” with HIX for their retiree population,
- 77% are confident that using HIX would enhance their ability to give employees more plan choices, and
- 51% believe HIX will be in a better position to keep health plans compliant with the ACA.
The Healthcare Trends Institute’s latest Healthcare Benefits Trends survey, based on responses from HR executives across a diverse demographic base (including small employers), found, on the topic of adopting a defined contribution health plan model using HIX, that:
- 14% of employers are either already using one or “considering” doing so,
- 13% are “still learning” about how it might work,
- 7% are “not interested,” and
- 42% “haven’t begun” to consider the option.
In the same survey, the ranking of anticipated benefits associated with the defined contribution plan model (among those already familiar with the concept) indicates that it would:
- Lead to better employee understanding of benefits costs (60%),
- Help employees make more cost-conscious benefits decisions (33%),
- Offer a wider array of options for benefit plans (28%), and
- Allow organizations to continue offering health benefits that would otherwise be in jeopardy (also 28%).
Notably, only 18% expected that the defined contribution model would “lead to lower health benefit costs for the organization.” There was even greater skepticism on this topic in the NBGH survey of larger employers, though the question was worded somewhat differently. Only 10% believed that HIX can control costs “better than your own plan.”
Variables to consider
Given that HIX clearly aren’t viewed as a panacea, it’s incumbent on employers of all sizes to conduct a thorough analysis of their health insurance provider options. But even before reaching that point, simplify your reasoning for looking at HIX and let that help you prioritize your scrutiny of available solutions.
For example, if the main driver is cost, you’ll need to take a broad look at the track record of HIX in that regard. If you have traditionally used fully insured plans, investigate whether self-insuring might not be a better option for reducing expenses.
With your most fundamental question resolved, you can consider other factors. For instance, are the designs of plans offered by HIX essentially consistent with what you have already been offering employees? Will the networks used by the new plans require many employees to find new providers? And can the health plans integrate their wellness programs with what you’re already offering?
Make no mistake, moving to the HIX model — and then picking a specific plan — will require a major effort from your organization. But it’s a process that more and more employers will be going through in the near future, according to recent survey data.
If you’re interested in exploring the option, contact Ron Present, Partner and Health Care Industry Group Leader, at firstname.lastname@example.org or 314.983.1358.