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Shift to private exchange coverage expected to speed up even more as 2018 approaches
An estimated 6 million U.S. employees and their dependents enrolled in private health insurance exchanges for their 2015 employer benefits, according to
an April 2015 report by Accenture, a global consultancy. These findings show private health insurance exchanges—an online platform for employees to choose their employer-sponsored benefits—doubled enrollment for 2015, up from 3 million in 2014.
Unlike government-run exchanges, private exchanges let employers provide eligible workers with an employer subsidy to purchase group coverage that complies with the Affordable Care Act (ACA) and meets the specifications of state insurance regulators. Private exchanges offer a range of coverage selections that vary by price and scope, typically from multiple insurance carriers. The model is sometimes referred to as "defined contribution health care," comparable with employer contributions to 401(k) retirement plans in which employers "monetize" their commitment in the form of a defined contribution rather than a defined benefit.
The findings show midsize employers—companies with 100 to 2,500 employees—contributed most to the increased adoption of private health exchanges in 2015. Based on its research, Accenture forecasts that enrollment in private health insurance exchanges will grow to 12 million in 2016 and 22 million in 2017, and that total enrollment in private exchanges will ultimately surpass state and federally funded ACA exchanges, reaching 40 million by 2018.
“We remain optimistic that several factors will catalyze enrollment growth in private health insurance exchanges through 2018,” wrote Rich Birhanzel, managing director for Accenture health administration services and co-author of the report. “This is especially true as the market matures, employers gain more control of benefit design and evidence continues mounting on the tangible benefits of the model.”
Other factors that the researchers cited as driving enrollment growth in private exchanges included the following:
• Compliance issues. Increased compliance burdens such as the ACA’s
minimum essential coverage reporting requirements, on top of an already substantial compliance workload, should make the reporting and compliance services of private , on top of an already substantial compliance workload, should make the reporting and compliance services of private exchanges more appealing.
• Consolidation. Continued investments by exchange sponsors in private exchange technology solutions, such as Aetna’s
acquisition of bswift and Mercer’s
equity investment in Benefitfocus, are expected to drive market maturity and scalability.
• Cadillac tax. The ACA will place a 40 percent excise tax on high-cost employer health plans beginning in 2018, and enrollment in private exchanges is expected to spike in 2017 as employers look to avoid these looming penalties. Research
estimates that 38 percent of large employers (those with more than 2,500 employees) and 17 percent of American businesses overall will face these penalties in 2018 if action is not taken prior. Private exchanges are likely to be seen as a means to migrate away from legacy high-cost plans while providing employees with new options to manage their health care.
The researchers focused on individuals and dependents under the age of 65 who receive group health insurance through an employer. Current 2015 enrollment was calculated by assessing enrollment activity in private health insurance exchanges through March 2015. Where relevant, findings from an Accenture survey of 2,709 U.S. employees, between the ages of 18 and 64, who receive health benefits from their employer were included. The research was conducted in March 2015.
Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter
Related News Article:
The Coming Revolution in How Employers Provide Health Insurance,
Washington Post, April 2015
Related SHRM Articles:
Private Exchanges Spur Health Coverage Shift,
SHRM Online Benefits, September 2014
Time for Defined Contribution Health Benefits?,
SHRM Online Benefits, September 2013
On Private Health Exchange, Choice Drives Satisfaction,
SHRM Online Benefits, March 2013
Related Video Clip:
Private Exchanges: A Practical Guide, Sun Life Financial, April 2015
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