CHICAGO — Employers and health insurance companies showed a visible appetite for private health exchanges at a conference Thursday, building on executives' desires nationwide to keep the growth of healthcare costs manageable.
Several companies and consultants who made the switch shared their experiences at the event. But private exchanges still remain far from widespread, as some employers are reluctant to shift their workers into fixed-dollar benefit structures.
Private exchanges are online health insurance marketplaces for a company's employee base. Employers often give their workers a defined contribution to buy medical plans, and then they choose coverage from one or several participating insurance companies. Vision and dental plans are also commonly included. The private exchange market has been a boon to outsourcing firms like Aon Hewitt, Mercer and Connecture, which build the marketplaces.
The Affordable Care Act has also promoted the exchange concept through the public individual and small-group markets. The central thesis of the exchanges is that consumers will have ample health plan choice, therefore keeping premiums in check through competition and allowing consumers to find a plan that fits their needs.
But many studies and surveys have shown people care more about their doctors and provider networks than the actual number of coverage choices they have. In addition, private exchanges indirectly encourage plans where employees shoulder more out-of-pocket costs.
About 6 million workers selected their health plans through private exchanges for 2015, double the amount from 2014 but still a very small amount of the employed market overall, according to consulting firm Accenture. Accenture predicts 40 million of the roughly 150 million nonelderly people with employer health insurance will be choosing their plans through private exchanges by 2018.
Hallmark Cards, the global maker of greeting cards and other products, moved its 6,100 full-time, active employees to Aon's fully insured private exchange this year. The company made the move because it wanted predictability in its healthcare costs and a less burdensome role in offering health benefits.
“The delivery system has grown so complex that I think it's reasonable for any employer to have not kept up with it,” said Tresia Franklin, Hallmark's human resources director.
Drugstore operator Walgreens Boots Alliance was one of the biggest employers to jump into a private exchange. Walgreens has used Aon's private exchange for two years now. Almost three-quarters of the 200,000 eligible employees have chosen a bronze or silver plan. UnitedHealthcare enrolled the most Walgreens members this year, said Tom Sondergeld, vice president of global benefits at Walgreens.
Price was a dominant consideration, especially for lower-wage workers. For example, 39% of Walgreens employees who make less than $25,000 per year chose a bronze plan for this year. Only 21% of workers with annual salaries above $100,000 picked a bronze plan.
But Sondergeld said people who wanted the more expensive gold and platinum plans with broader provider networks were still willing to do so. “The right way to get consumer-driven healthcare is to have consumers know what they are buying first,” he said.
He added that the private exchange has spurred employees to take the annual enrollment period more seriously. Normally, employees spend a couple minutes musing over their health plan options, or they ignore the process entirely. “It's really crazy to think that's a standard we'd live by,” Sondergeld said.
More employers have approached Aon about exchange quotes to see how much money they can save, and more insurance carriers want to be on Aon's private platform, said Matthew Levin, head of Aon's globally strategy. After Walgreens signed on, “we saw a huge amount of inbound interest,” he said.
The growth hasn't been restricted to active employees. More companies are looking at private exchanges for their retirees. The Blue Cross and Blue Shield Association is building an exchange for all of its affiliate plans with the goal of enrolling retired workers into Medicare Advantage, supplemental Medigap policies or Part D prescription drug plans.
“Private exchanges are not going to go away,” said Ann Mond Johnson, an adviser at benefits firm ConnectedHealth.