Employers continue to express interest in private exchanges, but most are hesitant to be the first to make the jump.

Nearly one-in-four large employers surveyed by Towers Watson say private exchanges could provide a viable alternative for active full-time employees by 2016. The recent survey of employee benefit professionals in mid-size to large companies polled 379 employers representing 8.7 million employees.

So far, according to Accenture, private exchange enrollment for 2014 reached 3 million full-time employees.

The majority of employers are still waiting to see evidence of what value private exchanges provide, but more importantly, they are waiting for someone else in their market to make the jump first, says Jean Moore, managing director of Towers Watson Active Exchange. According to Moore, 34% of employers are waiting for someone else to switch. Once that happens, she expects others will follow right away — even before data about the move comes in.

“Employers are reluctant to be the first employer to make a drastic change. [They’re] afraid of employee fallout,” Moore says. “They are not waiting on results, but waiting to see if another employer in their space does it.”

However, Moore does have a client who wants to be among the early adapters. The employer will make the change to a private exchange in 2015, as the client believes it will provide them with a competitive edge.

Size matters

When it comes to small employer groups, Moore explains those under 8,000 lives are more likely to make the move soon, as they lack the size and scale to be able to manage costs as well as large employers.

For example, brokers are increasingly directing their small-group clients to the exchange platform, Moore says. As many as nine out of 12 brokers use Liazon, which is owned by Towers Watson, as a white-label exchange platform, she says. “Brokers are in this space and directing a large number of clients, even very small” ones into private exchanges, she says.

Still, employers both large and small are not looking at public exchange options. Three out of four (77%) in the Towers study do not plan to move their active full-time employees to the public exchanges.

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