Enrollment in private health care exchanges hit 6 million for the 2015 plan year, according to Accenture doubling the 3 million figure from 2014. Most of the growth is in the mid-market segment, the consultancy says, with future growth expected to reach 12 million in 2016 and 22 million in 2017. By 2018, and the start of the Cadillac tax, Accenture estimates private exchange enrollment at 40 million.
There are a couple of factors behind the growth, says Sharon Cunninghis, leader of Mercers private exchange, the Mercer Marketplace. Employers are starting to focus on long-term benefit strategy and not one-year solutions. With upward cost pressure year-after-year, many employers have run out of traditional options in continuing to cut benefits every year, she says.
Administrative complexity was also a major factor as the volume of administration that is required to manage health benefits continue to increase, especially with health care reform, she adds.
For the 2015 plan year, enrollment in Mercers exchange was nearly five times larger than the year before. For 2015, the exchange covered 500,000 employees and retirees and provided exchange access to more than 1 million lives, including dependents. That compared with 110,000 eligible employees/retirees and 220,000 lives of a year ago. Mercer also saw the number of companies using its exchange in 2015 grow to 247 from 52 in 2014.
More and more large employers are looking at private exchanges and that is where a lot of the future growth will come from, says Scott Brown, who leads Accentures private health insurance exchange offering. The vast majority of these large employers have been in wait-and-see mode, but over the next couple years they will make the jump, he explains.
That is largely due to a continued investment in technology and solutions by exchange operators. Brown points to such examples as Mercer investing in Benefitfocus and Aetna buying bswift.
There is a lot of venture capital moving around and flowing into these [private exchange] firms, Brown says. That helps in one regard as you think about scalability and scaling up to growth.
Mercers Cunninghis says they are having many conversations with employers who are interested in a private exchange for the 2016 or 2017 plan year. In mid-2013 most of the conversations were about understanding what a private exchange is, and now with that education done, the conversation is shifting.
Brown also points to the Cadillac tax, which begins in 2018, as a pivotal time. With one out of every three employers impacted by the tax, many will transition to a private exchange, he says. At some unknown point in the future, a majority of companies will be impacted by the tax unless they can push their trend down to zero, adds Cunninghis.
The timing of those discussions will vary, she says. But the desire to manage cost and have some of the other advantages of a private exchange are real and important as employers consider a go-forward strategy and ... how much runway there is left in a custom strategy versus moving to a collaboration strategy, such as an exchange.
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