Employers See Private Exchanges as Viable Health Benefit

September 29, 2014 (PLANSPONSOR.com) – Twenty-eight percent of employers surveyed by Towers Watson said they had already extensively evaluated the viability of private exchanges for health care benefits. 

Nearly one in four (24%) employers said private exchanges could provide a viable alternative for their active full-time employees as soon as 2016, according to the 2014 Towers Watson Health Care Changes Ahead Survey. 

The 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%);
  • Adoption of private exchanges by other large companies in their industry (34%); and
  • An inability to stay below the excise tax ceiling as 2018 approaches (26%). 

In contrast, nearly all employers surveyed (99.5%) 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%) said they are not at all confident public exchanges will provide a viable alternative for their active full-time employees in 2015 or 2016.

“Even employers that have managed to keep increases in their health care benefit costs lower than industry averages are working very hard to maintain that success,­” says Dave Osterndorf, a managing director with Towers Watson’s OneExchange private exchange solution. “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,”

Nearly three-quarters (73%) 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%) said avoiding the excise tax is the top priority for their health care strategies in 2015. 

Osterndorf added, “Effective private exchanges can provide value in many ways. For example, 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.” 

The 2014 Towers Watson Health Care Changes Ahead Survey was completed in July 2014 by 379 employee benefit professionals from a variety of industries and reflect health care benefit decisions for 2016 to 2017. More results from the survey can be found here.