There has been a lot of activity and questions raised in the past month around exchanges, but one thing is clear–private health insurance exchanges are gaining in popularity.

Discussing this trend in a recent Xconomy article is guest contributor Lisa Suennen. In addition to featuring details from the latest Oliver Wyman study, she notes, “Quietly and in a relatively drama-free way, the private health insurance exchanges are busily taking over the world of insurance and, in my opinion, portend a radical set of changes in how our health insurance system operates.” Other key points made by Suennen include:

  • “A study from consulting firm Oliver Wyman suggested that ‘20 percent to 30 percent of the marketplace would gravitate to a private exchange over the next three to five years without any bias by size of employer.’ They also found that around 50% of all employers would switch to private health insurance exchanges if they could realize 10 percent savings; more than 20% of employers would move employees to exchanges even if there were zero savings.”
  • “I have to believe that while the mass migration to private exchanges may start slowly, it will pick up speed faster than Apolo Ono in winter. There are a few reasons why I believe this to be the case, including the giant hassle and expense of being the health benefits administrator of record. Being out of the benefits administration business means less overhead cost, less drama as employees come to you when they want something covered, less lawyers to keep up with HR regulation. On a positive note, transitioning to an exchange can also be a real positive for employees, opening up far more plan choices to them, enabling plan customization for special populations (e.g. disease-focused plans or regional-focused plans), even creating overall cost-savings in some cases.”

Private exchanges are being seen as a viable option by employers of all sizes. No matter the headcount, employers are facing difficult decisions on how to provide competitive benefits while also balancing costly healthcare plans. In this recent Business Insurance article, two related studies are showing that healthcare costs are a big concern for midsize companies specifically. Highlights include:

  • “According to a recent survey from the Automatic Data Processing Inc., the biggest challenge facing midsize employers is managing the cost of employee benefits, followed closely with meeting compliance obligations of the Affordable Care Act.“
  • “In a similar survey from the National Center for the Middle Market, 56% of employers polled cited health care costs as ‘highly challenging’ for their company, more than any other issue identified in the report.”

A recent survey we conducted of healthcare professionals indicates that large employer groups are expected to adopt a defined contribution (DC) model over the next five years; 70% of survey respondents said large employers will move away from the existing traditional defined benefit model to DC. This would be a dramatic shift in the future of health benefits for employers of all sizes and their employees, indicating that change in the health benefits space, like other consumer-focused industries, is governed by market demand and facilitated by innovative web-based technology.