Momentum is building around the private health insurance exchange marketplace, causing many organizations to regard exchanges and defined contribution plans as the future of employee benefits. However, the strategy is garnering mixed reviews from health insurance experts.
According to Grand Rounds, a company that offers second opinions and advice from medical specialists, the government is likely to drop public insurance exchanges in upcoming years in favor of private ones. The firm estimates between 20% and 30% of the exchange marketplace “will gravitate to a private exchange over the next three to five years, regardless of employer size.”
“Healthcare is an industry that has resisted yielding power to the consumers in the way that other industries have,” said Grand Rounds CEO Owen Tripp. “Just about every other industry from real estate to retail has made tremendous concessions to the consumer, thanks to the openness of the internet. But you can only slow consumer access for so long, and healthcare is about to follow the same path.”
Some insurers, like
Mercer and
Aon Hewitt, have already begun running fruitful private exchanges, Grand Rounds noted.
However, Willis North America is warning employers that moving to such a system may not be wise.
“Firms that are considering migrating to a private exchange/defined contribution strategy without considering the overall management of the underlying health are trend, risk simply engaging in an elaborate cost-shifting process,” Jim Blaney, CEO of Willis North America’s Human Capital Practice, said last week. “Until we acknowledge and address the fact that it’s our high degree of demand and utilization of healthcare resources that is driving costs, will we innovate a private exchange strategy that is really meaningful.”
Blaney said the private exchange model lowers overall costs by aggregating volume—not addressing the real reasons healthcare costs are skyrocketing.
By engaging with private exchanges, he believes costs will eventually shift costs directly to the employee as the employer’s defined contribution is exhausted. This could result in an “employee of the future that won’t be able to afford healthcare” through exchanges if cost inflation for healthcare doesn’t decrease.
Instead, employers considering private exchanges should make the model sustainable by implementing aggressive wellness plans and other health management initiatives into the exchange strategy. This will reduce overall consumption of medical resources, Blaney said.
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