32 Percent of Employers May Move to Private Health Insurance Exchanges within 3 Years
PricwaterhouseCoopers has released new results from its 2014 Touchstone survey of employers. The major take-away is that one third of employers are considering moving their active employers to private health insurance exchanges in the next three years.
I have been excited about private exchanges for a while now. Private exchanges are a way for us to solve a problem that we’ve been beating our heads against for years: Employers’ monopoly control of our health dollars is the “original sin” of U.S. health care. Nevertheless, it is so deeply embedded in our culture and business practices that anyone who threatens it by advocating individual choice in health benefits faces fierce blowback.
Employers’ growing interest in private exchanges is great news. On the other hand, 6 percent of employers are “actively considering” moving their employees onto Obamacare exchanges, and 26 percent are taking a “wait and see” approach.
(PwC has previously published research indicating that employers might be better off cancelling employer-based benefits and sending employees onto Obamacare exchanges. At NCPA, we have not predicted how many employers will drop coverage. However, we have described employers’ decision-making process in a series of booklets available to members.)
PwC describes four types of private exchanges, and illustrates with a case study: Walgreen’s use of Aon Hewitt’s exchange for its 160,000 employees. The advantages include:
…a better shopping experience for employees, additional choices with the ability to tailor products to fit individuals and relieving Walgreen staff of administrative duties.
“We’re still the plan sponsor, but administration is off my back. Plan design is off my back. I can focus now on well-being and strategy,” said Tom Sondergeld, Senior Director of Health and Well-Being.
The company had also already converted to a silver metal equivalent for its health plans, so it was easier to educate employees on how to purchase through Aon’s metal pricing tiers.
I’m not quite sure why a private exchange would use the same “metal” labels as Obamacare does, but it may be just to keep things simple for employees who were also subjected (as were we all) to the Administration’s relentless promotion of Obamacare during open enrollment.
The report also discusses the interesting question of whether health benefits are the new 401(k) and notes an interesting difference: “Health insurance, however, is a one-year obligation not subject to a decades-long planning horizon.”
Exactly! That is one of the major problems of U.S. health care. Financing our healthcare costs should be undertaken with a long-term view — which is not currently possible. For that to change, we need to move to portable, individual insurance. Private exchanges are a welcome development facilitating this change.
Do you seen a viable pricing alternative to the aforementioned tier/”metal” model?
I agree we need to move to individual insurance.
It is my understanding that the typical private exchange plan is group, not individual insurance.
Don Levit
Yes, but each individual employee has a choice. I suppose the business case for the consultants is economy of scale in sales, plus most individuals will be looking for Obamacare subsidies, which are not available in private exchanges.
“most individuals will be looking for Obamacare subsidies, which are not available in private exchanges.”
That’s true, and keep in mind many employed individuals who earn average or above incomes do not qualify for subsidies in the Obamacare exchanges anyway. So if not for private exchanges these employees would be faced with buying insurance on the individual market with no Obamacare subsidy – or a minimal subsidy. As I recall federal employees squealed loudly when they realized they faced the same threat of losing their employer’s premium subsidy.
An employer-sponsored group that purchases benefits thru a private exchange can choose to continue the same kind of premium support to its employees that it made before Obamacare.
Why would employers choose to do this? Perhaps because they believe subsidizing their employees’ medical benefits is a way to compete for labor. I think they may be right, that most employees will be grateful for the premium subsidies – – even though the company is taking the funds needed for premium subsidies away from funds that otherwise could be paid as wages. Remember those squealing federal employees.
Besides, for the time being at least, the company can claim its group premium subsidy as a tax deduction, while the employee needs not declare it as income.
So, it seems the only advantage the private exchange offers employees is the ability to choose.
So, now instead of one mediocre plan, they have several to choose from.
Don Levit
“the only advantage the private exchange offers employees is the ability to choose”
Really? That’s all you can see? You don’t want choices in your personal life?
The ability to choose is fundamental to an economy founded on the principle of a willing buyer and a willing seller.
We ignore that principle at our peril.
What are the time frame and conditions for employers taking “wait and see” approach?