Private health insurance exchanges represent a promising opportunity for self-insured employers to implement more strategic plan management without ceding complete control or unchartered territory that leads to a dead end.
Both scenarios were examined during a spirited panel discussion on the merits and caveats of the private HIX model at the Self-Insurance Institute of America’s 33rd annual National Education Conference & Expo in Chicago.
The Affordable Care Act did not envision the emergence of private exchanges, noted Larry Boress, president and CEO of the Midwest Business Group on Health. “There are no rules or regulations – yet,” he warned attendees, predicting that state insurance commissioners will be tempted to investigate the viability of these arrangements for self-insured plans. “There’s no guarantee these exchanges will exist in 12 months.”
But the fact is that many self-insured employers don’t have the scale, expertise or metrics to match a private HIX solution, countered Benjamin Pajak, a senior vice president of strategy and business development for Towers Watson’s Exchange Solutions business unit, one of the nation’s leading private HIX operators.
Employers have several options for managing their active employee populations, according to Pajak. One is to tweak existing health plan design to boost their performance over time and avoid the 2018 excise tax on so-called Cadillac coverage. Another is to exit the health insurance market, altogether, which he considered short-sighted relative to how current offerings stack up in the marketplace. A third option is to leverage the power of a private HIX to realize greater financial and administrative efficiencies.
One major reason Towers Watson’s Exchange Solutions decided to offer its exchange on a self-funded basis was an ability to gather data and track the decisions people are making in managing their health. About 100 employers have signed up for the exchange to manage active employee costs as part of four self-insured plan designs built on best practices, with a robust call-center expertise to answer a growing employee demand to talk out their options.
Chrysler tapped the company’s private exchange platform about eight years ago when it was still owned by Extend Health prior to the Towers Watson acquisition to manage the health benefits of Medicare retiree. There are now 300 employers with about 500,000 retirees on the firm’s private Medicare exchange, with the average client size being about 10,000 employees.
Competing exchanges also offer a self-insured solution. Aon Hewitt is the only major private HIX operator to only offer its services to employers on a fully insured basis, though Boress heard the consulting firm is considering adding a self-funded option to its business model.
Boress described private exchanges as “an untested” concept that’s not a silver bullet, cautioning attendees about the prospect of hidden revenue streams akin to the pharmacy benefits management model.
Another issue is the difficulty of comparing one private HIX to the next. “They’re apples to oranges to grapes to cherries,” he said, citing key differences in financial sustainability, customer service and other areas.
“When you’ve met one [private] exchange, you’ve really met one exchange,” Pajak quipped in reference to the difficulty of comparing competing private HIX operators. “Every exchange is built a little bit differently.
“There are new [private] exchanges popping up daily that are very motivated,” he later commented. “There are commissions in this space, and they are going to be working the client channels. We can expect lots of noise from them as they try and build their businesses.”
Boress believes the concept could appeal to employers with many seasonal or part-time workers and noted that several MBGH members are steering their pre-65 retirees into this benefits delivery model.
“We’ve already seen some leading-edge employers go into private exchanges,” Boress said. MBGH research, however, suggests that an overwhelming number of its more than 120 large employer members will adopt a wait-and-see approach about offering private exchanges.
Boress said key questions employers need to ask before deciding on a private HIX is whether it will reduce their overall health care costs, as well as still be able to recruit and retain talent.
