Many employers are turning to private health care exchanges to rein in costs and benefit consulting firms are reaping the benefits, according to a new report from Moodys Investor Services.
Major benefit consulting firms, such as Aon Hewitt, Mercer and Towers Watson, are investing significant funds and management resources to develop private exchanges themselves. Their experience in the industry, knowledge of employee benefit plans, client relationships and financial resources make them uniquely positioned to successfully capitalize on the market opportunity, the report found.
Employers and advisers have been looking for solutions to fast-rising health care costs over many years, and the largest of the benefit consultants have decided that exchanges can play a constructive role in that solution, says Bruce Ballentine, a Moodys senior credit officer.
The exchange is an efficient way to bring together the strengths of several insurance carriers with an array of products and offer employee choice, he adds.
The most successful exchanges will be those that minimize growth, or generate savings, in overall health care costs, rather than simply shifting costs from employers to employees, Ballentine says. Keys to success include building strong insurance carrier networks, guiding employees to select appropriate insurance coverage, promoting employee wellness, streamlining plan administration and ensuring compliance with regulations.
The Moodys report predicts enrollment in private exchanges could grow to tens of millions of active employees by the end of the decade.
Benefit consultants might also marginally boost revenues by selling ancillary products through their exchanges and/or by converting certain clients from administrative fees on self-insured plans to more lucrative commissions on fully insured plans as some employers look to transfer risk and earnings volatility to health insurers, the report says.
While the success of these private exchanges could signal job security for benefit advisers to large employers, its not a cure-all for the entire industry.
Theres still a possibility that over the next few years as the public exchanges gain traction, some small employers will step out of the health care delivery role, Ballentine says. In which case, the role of benefit advisers to small employers may diminish.
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