Private Health Exchanges Cut Costs 6 to 8 Percent; Increase Workers’ Choice of Plans
Paul Demko of Modern Healthcare has profiled some success stories of private exchanges for health insurance (free registration required):
After years of facing rising health benefit costs, household products manufacturer Church & Dwight Co. Inc. in 2012 switched its 3,200 employees from a health benefit program with three plan choices into a single, high-deductible health plan. But this year the publicly traded Ewing, N.J.-based company switched them again.
Working through a so-called private insurance exchange established by Buck Consultants, Church & Dwight gave its employees three coverage choices with a range of benefits, premiums and out-of-pocket costs. The exchange offers plan options from multiple insurers. The company says it anticipates the exchange will reduce its health benefit costs 6% to 8%.
Pharmacy chain operator Walgreen Co. switched this year to a private exchange run by Aon Hewitt. Previously, the company offered two health plan options to its nearly 250,000 employees. Now Walgreen is offering 25 different plans from five different insurers, although not all plans are available in all parts of the country. Aetna Inc., UnitedHealth Group Inc. and Kaiser Permanente are among the insurers competing for Walgreen workers.
We’ve been covering private exchanges since we made an argument for them as a critical step towards real health reform.
I believe private exchanges are a means to slowly move employers away from providing and administering employee health plans. Over time more and more corporations will outsource these functions. There could be a slowly merging of the group and individual market.
Thank you. And I think that would be a good thing. Those of us who have advocated for changing the tax-advantaged status of health insurance to give employees more choice are inevitably accused of wanting to harm the employer-based market.
The increasing acceptance of private exchanges goes a long way towards eliminating some of that friction.
More choices = lower prices, and this notion of private health exchanges is a great example of that! I hope this trend continues. I think more and more employers will go this direction, even though the national media will inevitably accuse such exchanges as a means of “taking away” people’s healthcare.
Walgreens employees have the choice of 25 plans through private exchanges! That’s a great example of how workers benefit from these exchanges. More options lead to a happier workforce.
Yet I wonder how many of those options meet ObamaCare’s “minimum requirements.”
Oh, I am pretty sure they all will. A company like Walgreens and its benefits consultant will not take the risk of skirting the law.
I wonder why this (like so many innovations) takes root among large employers first? I suppose that they are just more profitable for health insurers and consultants. Plus there may be regulatory differences between self-insured and fully insured groups that make it easier for the former to use private exchanges.
Nevertheless, the benefit of this model to small employers would be huge.
In addition to choice how are the private exchange plans different from group insurance
Are they individual policies
If so what value added do they provide
They differ in that the beneficiaries have a lot more choice. Plus they move towards defined contribution by the employer.
If you look at the Kaiser Family Foundation/HRET annual survey of employer-based coverage, you’ll see that most workers have a choice of only one or two plans, from the same carrier.
Allowing an HR staffer to choose your health plan is as absurd as allowing her to choose your house, school, or car.