Lower cost- that's what private exchanges initially promised employers, along with reduced administrative burden and more employee choice. But when you ask employers to define what a private exchange actually is, they're at a loss. And it's clear they're hesitant to move towards an undefined solution with slower-than-expected adoption.
Accenture originally estimated that adoption would grow rapidly, with 40 million employees and dependents under the age of 65 expected to enroll through a private exchange by 2018. The actual numbers paint a very different picture, with approximately eight million enrolling through private exchanges in 2016 - a 35 percent increase from 2015.
How is a private exchange defined?
In 2012, PwC defined a private exchange as "marketplace of health insurance and other related products". Since then, we've seen a flood of entrants in the market. And while each one still boasts the same promises, they're all different in terms of how they support employers.
Why are employers hesitating?
So what's stopping employers from making the move? The simple answer is uncertainty. First, the delay of the ACA's Cadillac tax halted the mass exodus, as many are waiting to see what the law will look like under a new presidency. Second, there is a lack of understanding about which private exchange to choose.
Who are/will be the early adopters?
While it isn't where it's expected to be, growth of private exchange enrollment is still happening, which, according to Accenture's annual report, is being fueled by midsize employers - defined as groups with 100 to 2,500 employees. Why? Small and midsize employers are starting to feel the pressure of the competitive job market, creating new demand for robust benefit packages. Private exchanges give them that option to provide more choice under a model that allows for efficiency and guides better decision making.
What should employers look for when choosing a private exchange?
Each employer has different needs and a unique workforce, so the most important thing to consider when selecting a private exchange is not to adapt the benefits program strategy to fit the exchange. A private exchange that provides the highest level of flexibility and scale enables employers to focus on delivering the right benefits package for their employees, and ultimately capitalize on the original promise of lower cost.
Want to learn about where the private exchange wave is headed? Join industry thought leaders at One Place 2017 to hear their predictions and preview the latest private exchange technology available for insurance carriers and employers.