The exchanges work like those that are expected to be operational in states under the Affordable Care Act next year in that they offer consumers more choices plus people who buy coverage are “empowered to make the choice that is right for each individual,” benefits consultants say.
“With 56 percent of employers considering a private exchange to provide benefits to their active employees or retirees, the transformation of the U.S. health care landscape is well under way,” saidDavid Rahill, Mercer’s president of health and benefits.
Under the Affordable Care Act signed into law by President Obama, millions of Americans in January of next year who have no coverage will receive federal subsidies of about $5,000 to help them buy coverage from health insurance companies that sell individual and small group policies. That subsidized coverage will be offered on exchanges as well but those marketplaces will be operated by each state or the federal government or a partnership between state insurance administrations and the U.S. Department of Health and Human Services depending on the state.
But in the private sector, the exchanges can work with so-called “insured plans” that tend to be sold to individuals or small businesses or self-insured plans that are typically offered by large companies.
Mercer rival Aon Hewitt, for example, has said its exchange launched last year that each employer in the exchange decides on the subsidy or “credit” that each worker will get to purchase coverage. Then, the employees take to the exchange to select their coverage. The subsidy will vary from employer to employer.
Critics of the exchange approach say it’s a way for employers to freeze the amount of money they provide to workers by essentially giving them a chunk of money and telling them to “go buy their own health care” with no promise that the amount offered to workers will rise or keep up with medical inflation in the future.
Mercer, however, sees the exchange approach as an “attraction and retention tool” for employers who will have more flexibility while their workers will have more choices. Mercer’s marketplace is at www.mercermarketplace.com.
Aon Hewitt has described its exchange will turn “selecting health benefits into a retail shopping experience” akin to Amazon.com (AMZN), or Orbitz (OWW). More than 100,000 workers from employers such as Sears Holdings (SHLD) and Darden Restaurants are already using the Aon Hewitt exchange.
“This year, we were able to offer a broader array of health care choices than we have in the past, giving our employees the flexibility to choose the level of coverage that best meets their needs at a price they could afford,” Danielle Kirgan, senior vice president of total rewards and shared services at Darden Restaurants said in an Aon Hewitt statement.
Industry data shows an even faster growing participation rate on the horizon. The firm said two-thirds, or 66 of large employers are “considering moving” to a retiree exchange in the next three to five years while 28 percent of employers plan to move active employees into an exchange during that same time frame.
“A well-constructed private exchange can benefit employees, employers and insurers,” said Ken Sperling, Aon Hewitt’s national exchange strategy leader. “Many of these insurance companies experienced positive enrollment results in the Aon Hewitt Corporate Exchange last fall so it is not surprising to see growing carrier participation in private exchanges for 2014.”