Private Exchanges Are A Viable Option For Employees In 2016, Say Nearly A Quarter Of Employers

Apparently driven by a desire to save money and encourage consumerism, 28 percent of midsize to large employers responding to a July 2014 survey by global professional services company Towers Watson said they had already extensively evaluated the viability of private exchanges and 24 percent said private exchanges could provide a viable alternative for their active full-time employees as soon as 2016.

The 2014 Towers Watson Health Care Changes Ahead Survey also revealed that the top three factors that would cause employers to adopt a private exchange for full-time active employees are:

• Evidence they can deliver greater value than their current self-managed model (64 percent);
• Adoption of private exchanges by other large companies in their industry (34 percent); and
• An inability to stay below the excise tax ceiling as 2018 approaches (26 percent).

Reluctance to consider public exchanges for employees. In contrast, nearly all employers surveyed (99.5 percent) said they have no plan to exit health benefits for active employees and direct them and their families to public exchanges, with or without a financial subsidy. More than three out of four employers (77 percent) said they are not at all confident public exchanges will provide a viable alternative for their active full-time employees in 2015 or 2016.

“Private exchanges offer employers a new opportunity to save on health care coverage with a reduced operational burden, which is the main reason they are more seriously evaluating them for their active employees,” said Dave Osterndorf, a managing director with Towers Watson’s OneExchange, adding that the potentially high cost of the ACA’s excise tax is “top of mind for large employers.”

The survey found that 73 percent of employers said they are somewhat or very concerned they will trigger the excise tax based on their current plans and cost trajectory. More than four in 10 (43 percent) said avoiding the excise tax is the top priority for their health care strategies in 2015.

Osterndorf highlighted some valuable aspects of private exchanges. “For example,” he said, “as more employers move to account-based health plans, they can realize the promise of avoiding the excise tax while providing the added benefit of putting employees in charge of how their health care dollars are spent. Private exchanges offer more choice, including account-based plans, with the tools and support for helping employees make better health decisions, and recognize the connection between their physical and financial well-being. Employee understanding and engagement are critical to the long-term sustainability of an employer’s program. Private exchanges can accelerate the fulfillment of that goal.”

According to the 19th Annual Towers Watson National Business Group on Health Employer Survey on Purchasing Value in Health Care, released in March 2014, nearly three-quarters of respondents currently offer account-based health plans (ABHPs), with another 9 percent expecting to add one for the first time in 2015. Nearly 16 percent of respondents have adopted ABHPs as their only plan option, up from only 7 percent in 2012. Nearly one-third of all companies could offer ABHPs as their only option by 2015, if they follow through with current plans.

For more information, visit http://www.towerswatson.com.

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