Why Go With a Private Health Insurance Exchange Model?

Public exchanges had the lion's share of headlines over the past couple of years, thanks in large part to the ongoing rollout of the Affordable Care Act. Despite their comparative lack of press, private health insurance exchange options have been gaining momentum over this time period and this momentum is projected to continue over the next few years.

More than 3 million U.S. citizens enrolled through private exchanges for 2014, according to the findings presented in the Accenture report "Insight Driven Health: Growing Pains for Private Health Insurance Exchanges" released earlier this year. In fact, the management consultancy predicted that the number of people using the private exchange model will exceed those using public exchanges by 2017, CIO.com reported.

In light of these conclusions and projections, a rising number of employers are weighing the merits associated with offering a private exchange to their workforce. Nearly one-third (32 percent) of the 1,200 companies across 35 different industries that were surveyed by PwC's Health Research Institute reported that they were contemplating transferring their employees to private exchanges within the next three years.

This statistic is particularly impressive when you take into account the historic opposition exhibited by many firms in reaction to the idea of private exchanges as recently as a decade ago.

"If you go back about 12 years when consumer-driven healthcare and high deductible plans started to emerge in the market, most employers said they would never do it," commented Barbara Gniewek, principal at PwC's Human Resource Services practice, as quoted by HealthLeaders Media. "[Today] there is an incredible level of interest in private exchanges from large employers."

Why go the private exchange route?

So, why are so many enterprises seriously considering going with a private health insurance exchange model? HealthLeaders Media outlined a few of the reasons.

  • They can save money in the short term.
  • They can reduce costs and offer superior experiences for their employees in the long term.
  • A greater portion of the costs and decision-making associated with benefits enrollment will move from employers to employees.
    • Workers will be more likely to find value and savings in private exchanges than traditional benefits packages that aren't as easily customizable and don't fit individuals' unique needs.
    • Health and wellness programs, which have seen a considerable increase in popularity over recent years, can be better integrated within the framework of private exchanges.
    • Employees using private exchanges tend to be more engaged and informed about their own benefits plans.

"Employers typically provide insurance for the average of the population," explained Gniewek. "They try to offer a portfolio of benefits that meets the needs of everybody, but nobody is average. Everybody is different. An exchange gives more options so people can buy what they want. Very often they will buy down. There is the savings that comes with people buying lesser coverage because they didn't need the level of coverage they had for whatever reasons."

Is your company looking at private health insurance exchanges for your employees? Have you already made the switch?