Few employers expect to save money on private exchanges

Those in the fast-growing private health insurance exchange business have some work to do to overcome doubts about how much money they\’ll end up saving employers. Many have already bought and have found tremendous savings at http://www.UnitedStatesInsuranceMarketplace.com.

That’s one of the more sobering tidbits to come out of a survey of more than 700 employers of all sizes and in a variety of industries.

The good news is that the survey found that 45 percent of the responding employers plan to consider or will be using a private exchange before 2018.

The number of private exchanges has increased of late as major consulting players such as Aon Hewitt, Towers Watson and Mercer have launched or expanded their own and begun to sign on employer clients.

Conducted by the Private Exchange Evaluation Collaborative, the survey found what other, similar studies have ascertained – that employers are looking to cut costs and administrative burdens, though it also uncovered a measure of doubt by employers.

The PEEC was recently launched by four non-profit business coalitions – Employers Health Coalition Inc. (Ohio), the Midwest Business Group on Health, Northeast Business Group on Health, and the Pacific Business Group on Health – and PwC U.S., the accounting firm.

“Private exchanges have the opportunity to gain traction over the next five years as an alternative to traditional employer-sponsored benefit options,” said Christopher Goff, CEO and General Counsel of the Employers Health Coalition. “However, many of the firms that have served as ‘trusted advisors’ to employers for benefits strategy and vendor evaluations are now vendors themselves, providing private exchange solutions to employers.

“We’ve established the collaborative to serve as an independent, unbiased party to assess the marketplace and evaluate private exchange capabilities to meet employer needs and objectives and the findings in this survey will help us accomplish these goals.”

Among the survey’s key findings:

Close to 70 percent of employers believe it is very important that their advisor is independent of any exchange they are considering. (This finding bodes well for the nation’s independent benefits brokers who fear they’ll lose business with the rising popularity of exchanges, both public and private).

Only 25 percent think moving to a private exchange will save them money.

The greatest barriers to private exchange adoption relate to their immaturity, the uncertainty about their long-term stability and employer’s loss of flexibility, especially as it relates to tailoring benefit plan designs.

Interest in private exchanges extends across all industry segments and employer size, while the importance of exchange features varies between employers.

Employers are split on whether they will move to a defined contribution approach.

The online survey was conducted in November of 723 respondents representing self-insured and fully-insured employers.

“The survey results indicate a strong interest in private exchanges, but also uncertainty about the benefits,” said Laurel Pickering, President and CEO, Northeast Business Group on Health. “PEEC will assist employers with their review of private exchanges, help them navigate the complexities, and determine the value proposition.”

Consulting firm Accenture has predicted as many as 40 million Americans would get their coverage via private exchanges by 2018.


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