As employers begin to prepare for a new benefits enrollment season, the topic of private exchanges may arise. While these platforms are no longer new, they are certainly still in their infancy, and have not seen the adoption rate that many predicted. One reason for the low implementation rate may be the many questions that remain unanswered. Here are the top five questions employers are asking:
 

1) Will a private exchange directly control my health care costs, and/or bend our health care trend?

The answer is no. Private exchanges are a platform to deliver benefits, but are not a direct cost control mechanism. In addition, cost sharing does not change medical trends, even if it does reduce costs. With an exchange, employers are still at risk for excise taxes unless a more fundamental change is made. Moving to a defined contribution arrangement has piqued many an employer’s interest, but it does not stem the growth of the total cost of health care.

2) Will a private exchange help me attract and retain the key talent I need?

It depends on how rich your benefit plan design is compared to the plans offered through an exchange. Is the plan appropriate for the majority of your current workforce and prospective employees? Do you consider the ages and salaries of your entire workforce when developing your benefit design? Do you provide multiple plan choices? Have your employees asked for enhancements that you haven’t been able to provide?

3) Will I be able to deliver a competitive benefit package without a private exchange?

Without question, the answer is yes. The benefit package you offer is based on your company’s philosophy and culture. An exchange can certainly streamline some aspects of managing the plan, but the specific benefits offered are your decision.

4) Will a private exchange bring value to our organization?

For many employers, the technology of a private exchange is no more sophisticated than their current benefits administration platform. It is important to understand the capabilities and limitations of the exchange, as well as who is the owner and how much accessing the exchange will cost. As some exchange owners merge to aggregate market share, objectivity may be limited.

5) Does exchange technology provide a solution to the ACA reporting requirements?

Many exchange solutions will have technology built in; others may partner with a third party to address the reporting requirements. Employers should look at each specific exchange to learn about its available features.

Gowen is senior vice president and an employee benefits national practice leader for Wells Fargo Insurance Services USA, Inc. With more than 20 years of experience in the benefits industry, Gowen is responsible for the development of new employee benefit products and services, as well as managing third party and carrier relationships. Reach him at (312) 416-4307 or dan.gowen@wellsfargo.com.

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