Considering a private health care exchange?

Private Health Care Exchange

Posted by Jill Korsh, Grant Ruttinger and Patrick Travis on February 11, 2014

According to Deloitte’s 2013 Survey of U.S. Employers: Health care costs, benefits, and reform: What’s the next move for employers?, most employers are taking a “wait and see” approach to public health care exchanges under the Affordable Care Act. However, when asked about their likelihood of offering a private exchange to their employees, the majority of employers in all size ranges (from 50 employees to 2500+ employees) said they were at least somewhat likely to adopt a private exchange (see Figure 1). If your company is considering a private exchange, here are some things to think about.

By now, most of us are familiar with the public health care exchanges available under the Affordable Care Act. A private health care exchange offers an alternative online marketplace where a vendor, rather than the federal or a state government, arranges for and manages plans and carriers. Employers provide their employees with a fixed-dollar allowance or account to “shop” on the private exchange, selecting from multiple standardized plan options offered by carriers on the exchange. Employees are responsible for paying any difference between the allowance they receive from their employers and the full cost of the plan they select.

Figure 1: “How likely is your company to use a private health insurance exchange as a channel for providing health insurance for your employees?”

How likely is your company to use a private health insurance exchange as a channel for providing health insurance for your employees?”

* Small sample; directional only
Data are rounded and may not total 100%
Source: Deloitte 2013 Survey of U.S. Employers

The value proposition for moving to a private exchange is that it gives employers the opportunity to improve cost management and transition out of health insurance administration, contracting, management, and compliance assurance. Employees gain the opportunity for greater choice and involvement in their health insurance decisions.

That said, moving to a private exchange is not a “no brainer” decision. At issue is how to most effectively provide benefits, manage costs, and reduce talent implications in an environment marked by rising health care costs and sweeping reforms. Organizations should dig deeper to consider factors such as:

  • Fit with long-term objectives — A private exchange may be a fit if the organization is looking to cap or reduce costs and volatility, relieve the administrative burden of managing insurance matters in-house, and is willing to accept a decreased role in plan design, management, and employee interaction.
  • Plan and administration cost — It is important to consider the variations in cost under a private exchange in areas such as population health management, plans and programs offered, plan costs and discounts, and administration. There are also internal costs to consider as management functions are reduced or eliminated.
  • Talent management — Private exchanges impact talent strategy, as they may be perceived as disconnected from the organization. Private exchanges can offer employees more plan choices and flexibility; however, greater choice and flexibility can lead to confusion, which requires communication and decision support. There may also be changes to care management, disease management, and other employee engagement programs.
  • Health care strategy — Also factoring into the private exchange decision is the broader health care strategy to continue to provide benefits or pay a possible future penalty under the Affordable Care Act (“pay or play”). Private exchanges should be considered as part of both an organization’s short- and long-term benefits strategy.

It’s important for organizations to explore private exchanges from an objective perspective. Considering that many large health and welfare benefits consultants are now acting as private exchange sponsors, organizations may have to look beyond their current consultants to receive an independent evaluation of the private exchange opportunity.

We’re working with many employers to provide unbiased guidance in this area. We lead employers through an assessment of their options and, if they decide to go with a private exchange, assist them in choosing the one that most closely meets their objectives. If we can answer any questions for you about private exchanges or the evaluation process, feel free to comment below or reach out to any of us via email.

Jill Korsh is a senior manager in the Human Capital practice of Deloitte Consulting LLP and leads its Employer Private Healthcare Exchange Consulting services.
Grant Ruttinger is a specialist leader in the Human Capital practice of Deloitte Consulting LLP and leader of the Rewards Communications group.
Patrick Travis is a specialist leader in the Human Capital practice of Deloitte Consulting LLP and a member of the Deloitte Consulting leadership group on Employer Implications of Healthcare Reform (PPACA).

Leave a Reply