Accounting for barely 1% of enrollment in all employer-sponsored benefits plans, private exchanges are currently a dimly lit bulb on the radar for group health insurance delivery. But there’s little doubt that number will rise.

Michael O. Leavitt, a former U.S. Department of Health and Human Services secretary and three-term Utah Republican governor, recently cited industry research suggesting that more than 45% of group plans will be brought through the private HIX model within five years. His health care intelligence firm, Leavitt Partners, found that 77% of health care executives believe it will become a viable distribution mechanism for employer-provided benefits over the long haul.

“We believe private exchanges will experience substantial and possibly exponential growth over the next several years to the extent that they are successful in providing the cost relief and the level of choice envisioned,” Leavitt noted in an interview published by HighRoads, whose services include benefits plan management and health care compliance. “Private exchanges will continue to evolve by innovating and providing additional tools and services to employers to help mitigate both health care and HR costs.”

Addressing the issue of innovation, he predicts that private HIX operators will attempt to differentiate their services through a host of expanded and customized benefit offerings, as well as advanced technology, data warehousing and measurement.

Among the areas that will be ripe for such distinction, according to Leavitt: care management, medical advocacy, banking or legal services, professional employer organization services and pet insurance. He also believes that reporting platforms, dashboards, performance metrics and compliance assistance will be tailored to employer needs.

In addition, Leavitt said private exchanges are “well-positioned to become service providers of objective quality ratings, overall cost metrics (premium and out of pocket), as well as insurance coverage norms and standards across population segments.” Benchmarking also will emerge as “a valuable tool” for helping define product quality and guiding employees through more informed coverage choices, he added.

Other key themes Leavitt addressed include private HIX product trends, efforts to improve efficiency and customer service, the level of private HIX competition in a particular region and evolution from proprietary products to more standardized offerings. Other points centered on whether private exchanges would be regulated and rules driven at the regional, state or federal level, as well as the fate of broker commissions.

Bruce Shutan is a Los Angeles freelance writer.

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