Are ACOs the ‘next big thing’ in private exchanges?

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As private exchanges move from streamlining the enrollment process to next phase initiatives such as improving cost and delivery, industry insiders see the integration of accountable care organizations as potentially the ‘next big thing' in the exchange world; one that could be a big win for employers.

ACOs are networks of providers, including doctors, hospitals and other health care professionals and facilities that tie provider reimbursements to quality metrics and reductions in the total cost of care for an assigned population of patients. The Affordable Care Act’s emphasis on quality of care and health care cost-cutting has given rise to new interest in the ACO delivery model, and industry insiders say private exchange operators are increasingly seeking to integrate the ACO model.

Also see: “ACOs: What are they, how do they work and are they right for you?

“The enrollment experience itself can vary across the private exchanges and a lot of the initial focus in private exchanges was around the enrollment experience, but what’s evolving is how the exchange supports people with their health care needs over time,” says Michael Thompson, a principal at PricewaterhouseCoopers

While many private exchanges are multi-carrier exchanges with competing health plans, Thompson says in reality there is a great deal of overlap between the networks, so not a lot of competition.

“Many people think there could be more value if provider systems compete against provider systems or they compete against national networks,” he says. “The goal is to get away from competing health plans to have provider systems compete more effectively.”

“I think everybody believes health care delivery is a local or regional issue and the more you can focus on the variation that you find at that level, the more we should be able to impact it and provide higher quality and lower cost care. That’s the concept. Most of us have been saying that ACOs can and will have impact,” says James Smith, a senior vice president with The Camden Group consultancy.


In fact, the ACO model has proved successful for the Centers for Medicare and Medicaid Services, which said in 2014 ACOs in the Pioneer ACO Model and Medicare Shared Shavings Program generated more than $417 million in savings for Medicare. At the same time, ACOs qualified for shared savings payments of $460 million.

Carriers and regional plans are also utilizing the ACO model for insureds, but the challenge, Thompson says, especially for employers is having a meaningful number of employees in one location to utilize an ACO.

The advantage of a private exchange, then, he says is that the exchange can bring multiple employers together and offer more employees in one location.

In 2012, Bloom Health partnered with Medica health plan to create the first private exchange in the country offering competing ACO products, and Thompson says it’s a model “a number of exchanges are going forward with. They’re looking to make this a value part of their proposition.”

Medica offers several ACO-based products and a broader network within the ACO group. Employers that choose to offer coverage through the exchange give their workers a choice between the ACOs and the more expensive broader network option. The broader network option also includes some specialists who are part of the ACO but not part of the major care system at its core.

According to Bloom Health, half (50%) of employees eligible for the ACO model are choosing it when given the option between ACO and a traditional open access network. The model creates competition for customer loyalty and market share based on the service and quality delivered. Bloom Health says the consumer experience has been so positive that 89% of employer groups increased their ACO membership on renewal.

Employer considerations

Employers and their advisers considering a private exchange/ACO option should still do a thorough analysis of the benefits and drawbacks for their particular employee population, Smith says.

Key things for employers to consider include:

  • Coverage: What is the coverage? How is coverage provided outside of the region, and then how does the coverage compare with others in the marketplace.
  • Networks: How are the networks being paid? Does the provider network receive a return if they don’t perform to the metrics? Also, what are the positives of the plan over a normal plan?

Also of importance for employer consideration, Smith says, is how the plan is being run through the providers. This includes what reports the employer will have access to and the timeliness of the reports. Also, is there a contract between the network and the private exchange or a joint venture between two entities? And if so, what is the governance model?

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