Approximately 8 million people are enrolled in private benefit exchanges, according to Accenture — far away from the consultancy’s 2013 prediction of 40 million by 2018. Yet, John Caldarella, national practice leader, active health exchange at Aon, says the focus should not be on numbers. Exchanges, he says, are just a tool to encourage consumer-driven healthcare. Caldarella shares what employers are looking to get from their benefits and how exchanges may be part of the solution.
EBA: What happens when employers decide to move to a private exchange?
Caldarella: I like to look at the exchange from a perspective of it is an enabling mechanism as opposed to a strategy in itself. Some will refer to exchanges as an outsourcing move, others refer to it as a transformation. I like to think of it that as employers are adopting consumer-driven health plans and adapting to the complexity of the health space, that this is a mechanism to enable both further acceleration along the CDHP curve and it is a mechanism to help them manage the emerging complexities in the marketplace.
EBA: What are your thoughts on Accenture’s 2013 estimate of 40 million enrolling through private exchanges by 2018?
Caldarella: Folks have been really focused on exchange adoption. To me it is just a tool you use to get to CDH adoption. Aon’s 2016 survey says 15% of organizations are in full replacement now and another 43% are considering it in the next three-to-five years.
When I think of that Accenture number, I put it in the context of CDH. If you are going CDH in today’s marketplace, you are going to need a way to handle the complexity and an exchange is great way to deliver on that complexity, not just as a one-time hit, but as an ongoing management mechanism. I think we are going to hit those numbers that Accenture was referencing in the near-term, but it won’t be so much of this is how many exchange clients we have and our competitors have.
Because the definition of an exchange is broadening, I would stay focused on the adoption of CDH, and once you uncover that, you will uncover the mechanism they are using if it is an exchange or it is exchange-like.
EBA: Are employers looking for consumer-driven healthcare?
Caldarella: It goes back to the evolution of plan sponsors/decision criteria. We moved from buying local — the most-efficient HMO in a given geography or a national health plan in a given geography and a choice between those two or three options — to something that looked more like putting all employees in a national plan and buying nationally versus buying locally. It is swinging back to buying locally. As carriers are driving more local purchasing they are investing a lot in ACO development.
The one difference between ACOs and HMOs is that HMOs were almost born as distinct health plans, while ACOs were being incubated more or less under a carrier banner, so they are a bit more subtle. But, the acceleration to buying locally is happening. If you look at the statistics, the number of independent health systems that have more than 3,000 employees, the choice of health system in a given state, there are only 12 states where residents of that state have the choice of three or more systems. Everybody else is smaller then that. Industry consolidation is already happening .It is not just acquisitions, but affiliations. As a result, you are getting differentiation in the local marketplace between plans. That dynamic is happening.
A typical plan sponsor isn’t going to increase the staff they have in benefits, they will look for a partner to help them evaluate that on an ongoing basis, and it is just more complex. There are efficiencies to gain and this is a mechanism to do that. It is less about, ‘Hey, I want to adopt an exchange,’ to more, ‘I need a way of managing this complexity going forward and exchanges are an attractive offer for that.’
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