Can’t decide which way to go on a public or private health insurance exchange, or how those two models even differ? Stumped by the merits of a single-carrier vs. multi-carrier exchange? Want to know which of the industry’s many players will turn out to be the right HIX partner?
Sibson Consulting, a division of Segal, has published an article entitled, “Thinking of Joining a Private Health Insurance Exchange? Look Before You Leap,” to help employers make informed choices. The authors include Nancy Duta, a health consultant who specializes in strategy, plan design, cost management options and communications, and Christopher Calvert, a senior vice president and health practice leader.
“Many private exchanges are aggressively marketing their services as they compete for business,” they point out. “Before employers sign on, however, they need to do their homework and learn about the various options.”
Among the key questions employers will need to answer:
- What is their long-term strategy and Employment Value Proposition, or EVP (defined as an organization’s benefit offerings, coupled with “experience and opportunity in exchange for an employee’s effort and commitment”)? The larger point is that health care coverage helps raise the level of employee attraction, retention and engagement. Having said that, the authors observe that under a private exchange, “each employee would pay a different premium, partly because each employee would choose a plan that best fits his or her needs. How employers address this issue would depend on their EVP and the extent to which they want to make their employees financially ‘whole’ by increasing their compensation and/or benefits.”
- What is the exchange’s underwriting model, as well as the role of adverse selection? The rates of a private exchange with three or four large employer customers that doubles in size the next year may change and could swing wildly if there’s a significantly new demographic makeup. Moreover, adverse selection could result and spike premiums if enough older or unhealthy employees decide on the HIX option.
- How involved do they want to be in vendor administration? An HIX may reduce, but not eliminate, administration. Related considerations include determining how much consistency and uniformity employers want for their workforce. Communication with insurance carriers also may change. “Employers need to think about whether they would be working directly with the exchange or vendor platform and if daily communication would be with the exchange or the insurance carriers,” they note.
- Will an HIX improve access to high-quality health plans? Multistate employers can benefit from a menu of insurance carriers, but they will first need to determine whether an exchange offers coverage that’s at least comparable to their current plan offerings in terms of premium rates and quality of care. While the HIX model could offer greater freedom and choice of coverage options, they caution that “employees could enroll in a less rich plan and be subject to more out-of-pocket costs than intended in time of illness.”
