Why Private Exchanges Haven’t Taken Off As Predicted

Why Private Exchanges Haven’t Taken Off As Predicted

While the health care affordability crisis has become so significant, questions still linger—will private exchanges become a viable solution for employers and payers, and will they will continue to grow? Back in 2015, Accenture estimated that 40 million people would be enrolled in private exchange programs by 2018; the way we see this model’s growth today doesn’t speak to that. So, what is preventing them from taking off as they were initially predicted? We rounded up a few reasons why the private exchange model’s growth may be delayed, or coming to a halt.
They Are Not Easy to Deploy
There is a reason why customized benefits technology was the talk of the town over the last two years; it takes very little work up-front to customize your onboarding process. Alternatively, private exchange programs don’t hold the same reputation. The online platform selection, build, and test alone can get you three to six months into the weeds. Underwriting, which includes an analysis of the population’s demographics, family content, claims history, industry, and geographic location, will need to take place before obtaining plan pricing if you are a company of a certain size. Moreover, employee education can make up a significant time cost, as a lack of understanding and too many options can lead to an inevitable resistance to changing health plans. Using a broker, or an advisor, for this transition will prove a valuable asset should you choose to go this route.
A Lack of Education and a Relative Unfamiliarity Revolves Around Private Exchanges
Employers would rather spend their time running their businesses than understanding the distinctions between defined contribution and defined benefits models, let alone the true value proposition of private exchanges. With the ever-changing political landscape, employers are met with an additional challenge and are understandably concerned about the tax and legal implications of making these potential changes. They also worry that, because private exchanges are so new, they haven’t undergone proper testing to determine their ability to succeed, and early adoption of this model has yet to secure a favorable cost-benefit analysis that would encourage employers to convert to this new program.
They May Not Be Addressing All Key Employer and Payer Concerns
We see four key concerns stemming from employers and payers:

  • Maintaining competitive benefits: Exceptional benefits have become a popular way for employers to differentiate themselves in recruiting and retaining top talent. What’s the irony? More options to choose from across providers and plans means employees lose access to group rates and can ultimately pay more, making certain benefits less. As millennials make up more of today’s workforce and continue to redefine the value they put behind benefits, many employers fear they’ll lose their competitive advantage with private exchanges when looking to recruit and retain new team members.
  • Inexperienced private exchange administrators: Because many organizations have limited experience with private exchanges, they need an expert who can provide expertise and customer support for both them and their employees. Some administrators may not be up to snuff with what their employees need and expect.
  • Margin compression: In the eyes of informed payers, multi-carrier exchanges not only commoditize health coverage, but perpetuate a concern that they could lead to higher fees. Furthermore, payers may have to go as far as pitching in for an individual brokerage commission on what was formerly a group sale.
  • Disintermediation: Private exchanges essentially remove payer influence over employers. Bargaining power shifts from payers to employers and transfers a majority of the financial burden from these decisions back onto the payer.

It Potentially Serves as Only a Temporary Solution to Rising Health Care Costs
Although private exchanges help employers limit what they pay for health benefits, they have yet to be linked to controlling health care costs. Some experts argue that the increased bargaining power of employers forces insurers to be more competitive with their pricing, but there is a reduced incentive for employers to ask for those lower prices when providing multiple plans to payers. Instead, payers are left with the decision to educate themselves on the value of each plan. With premiums for family coverage continuing to rise year-over-year—faster than inflation, according to Forbes back in 2015—it seems private exchanges may only be a band-aid to an increasingly worrisome health care landscape.
Thus, at the end of it all, change is hard. Shifting payers’, employers’, and ultimately the market’s perspective on the projected long-term success of private exchanges will be difficult. But, if the market is essentially rejecting the model, shouldn’t we be paying attention?
By Paul Rooney, Originally Published By United Benefit Advisors

Best and Worst States for Group Health Care Costs

Best and Worst States for Group Health Care Costs

Employer-sponsored health insurance is greatly affected by geographic region, industry, and employer size. While some cost trends have been fairly consistent since the Patient Protection and Affordable Care Act (ACA) was put in place, UBA finds several surprises in its latest Health Plan Survey. Based on responses from more than 11,000 employers, UBA recently announced the top five best and worst states for group health care monthly premiums.
The top five best (least expensive) states are:
1) Hawaii
2) Idaho
3) Utah
4) Arkansas
5) Mississippi
Hawaii, a perennial low-cost leader, actually experienced a nearly seven percent decrease in its single coverage in 2016. New Mexico, a state that was a low-cost winner in 2015, saw a 22 percent increase in monthly premiums for singles and nearly a 30 percent increase in monthly family premiums, dropping it from the “best” list.
The top five worst (most expensive) states are:
1) Alaska
2) Wyoming
3) New York
4) Vermont
5) New Jersey
The UBA Health Plan Survey also enables state ranking based on the average annual cost per employee. The average annual cost per employee looks at all tiers of a plan and places an average cost on that plan based on a weighted average metric. While the resulting rankings are slightly different, they also show some interesting findings.
The 2016 average annual health plan cost per employee for all plan types is $9,727, which is a slight decrease form the average cost of $9,736 in 2015. When you start to look at the average annual cost by region and by state, there is not much change among the top from last year. The Northeast region continues to have the highest average annual cost even with the continued shift to consumer-driven health plans (CDHP). In 2016, enrollment in CDHPs in the Northeast was 34.9 percent, surpassing those enrolled in preferred provider organization (PPO) plans at 33 percent. Even with the continued shift to CDHPs, the average annual costs were $12,202 for New York, which remained the second-highest cost state, followed by $12,064 for New Jersey, and rounding out the top five, Massachusetts and Vermont flip-flopped from 2015 with Massachusetts at $11,956 and Vermont at $11,762.
As was the case in 2015, Alaska continues to lead all states in average health plan costs, topping New York by more than $1,000 per employee, with an average cost of $13,251. While year-over-year the average cost for Alaska only increased 3.35 percent, the gap increased to 36.2 percent above the national average of $9,727.
Keeping close to the national average increase, the top five states all saw a year-over-year increase of less than 4.5 percent. Unfortunately, even at a modest increase, the one thing that the top five have in common is that they all are more than 20 percent above the national average for health plan costs per employee.

By Matt Weimer, Originally Published By United Benefit Advisors