“Change brings opportunity.” – Nido Qubein, a motivational speaker.
While many parties in the health care industry are dealing with the complexities associated with the implementation of the Affordable Care Act, a new health insurance opportunity is gaining traction among both employers and employees.
That opportunity is called private exchange and it has its origins in the late 1970s, when employers began experimenting with defined contribution benefit plans by offering employer-sponsored cafeteria plans.
Although not actually part of the Affordable Care Act, private exchanges now are being created throughout the nation to help employers better manage health care costs and offer improved coverage options for employees. Focused media attention and the adoption by some major insurers and brokerages have fueled the increasing popularity of private exchanges and forecasts for a successful future.
A survey released by the Private Exchange Evaluation Collaborative found that 45 percent of employers surveyed plan to consider or will be using a private exchange for their employees before 2018.
In addition, the consulting firm Accenture estimates that a million people will enroll this year in private exchanges, with that number possibly growing to 40 million over the next four years.
Why are private exchanges so popular and what should employers and employees know about them?
First, with a private exchange, employers choose a contribution amount to make available to employees for the purchase of health insurance and other employee benefits. The employee can then choose from a wide array of benefit selection options.
Depending on the type of private exchange model, companies can choose either fully insured or self-insured funding arrangements, as well as a selection of employee decision-support tools.
These decision-support tools empower employees in their plan selections. Employees will be able to forecast their annual premium costs while also estimating their out-of-pocket expenses.
Proprietary decision-support tools can further help employees to project the number of physician office visits, specialty and emergency room visits and hospital days as part of this process.
Private exchanges hold promising possibilities for the employers that seek to divest some of the financial responsibility for medical inflationary pressure. They can help companies reduce health care costs and simplify their benefit plan administration.
As with any new product or service in the health insurance marketplace, it is important for both employers and employees to understand the composition, benefits and value proposed by private exchanges.
They might just find that change brings opportunity.