Middle-market employers are most likely to drive private benefit exchange growth over the next two years. They seek the appeal of the technology, but at the same time, face adoption risks.
Before 2017, 27% of all employers will have moved their organization to a private exchange, according to data from Aite Group, released during a webinar earlier this week.
For these employers, a private exchange is a defensive play. “Employers are kicking the tires due to the Cadillac tax,” said Michael Trilli, senior analyst at Aite Group, during the webinar, which was sponsored by hCentive.
Forty-four percent of employers with 100-499 employees and 38% of employers with 500-999 employees will switch to private exchanges, driving growth over the next two years, according to the survey. This compares with 22% of employers with 1,000 to 1,999 employees, 18% with 2,000 to 4,999 employees, and 22% with more than 5,000 employees.
The growth in the middle market is primarily due to cost containment, employee choice, the value of bundling and the appeal of the technology. “These four areas are levers that provide lucrative offerings and the allure of technology to fill a benefit administration gap,” Trilli said. “When you look at cost containment, these are some key value propositions why this [middle-market] sector will adopt private exchanges.”
However, there are challenges in adopting an exchange, including channel development, mergers and acquisitions and change management.
The mergers and acquisitions, in particular, are creating some hesitancy as they are creating a new competitive landscape, Trilli said. They are giving pause to health plans and brokers as they sort through the implications “and rewrite the new rules of engagement.”
Right now, private benefit exchanges are working on “protecting the basics,” such as decision support, bundling and voluntary sales, Trilli said. But looking toward the future, private exchanges will seek to enhance outcomes through continued streamlining, including more flexible integration, expanded integration features and deeper HR/benefit administration resources.
In the long-term future, private exchanges will connect to utilization, through care coordination programs, health and wellness, price transparency and claims analytics, Trilli said.
“The window of opportunity for [private exchanges] is improving and, despite acquisitions, there are lots of third party [players] out there,” Trilli added. “Are [brokers] ready to help employers with them?”
Register or login for access to this item and much more
All Employee Benefit Adviser content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access