Large Employers Undecided About Private Exchanges

May 6, 2014 (PLANSPONSOR.com) – Three-quarters of large employers polled are fully committed to providing an array of employer-sponsored benefits as a part of their total rewards program.

They said they will continue to actively look at all potential tactics to manage the costs associated with their health benefits plans including exchanges, wellness programs and other strategies, according to a survey conducted by Pacific Resources, with question design and response analysis assistance provided by Milliman. However, while nearly all large employers (91%) believe they have a “good to excellent” understanding of the opportunities, challenges and decisions required to move to a private health care exchange, their levels of confidence and interest are varied. 

Slightly more than half of large employers (51%) are at least somewhat confident private exchanges will be a viable alternative to current methods of providing health coverage to active employees, the other half (49%) are not confident or are unsure. The current level of interest in private exchanges is split, with half showing some level of interest and the other half indicating no interest at this time.

Currently, 37% have no plans to evaluate private exchanges, and 13% have conducted an evaluation and decided not to move forward with an exchange as a replacement to their current medical benefit plan. However, 35% indicated they have begun to evaluate private exchanges as a potential benefits strategy for active employees, 11% are interested in evaluating exchanges and 3% are currently in an exchange.

When asked how they would evaluate private exchange vendors, 34% said they had not determined an approach, 25% would perform the evaluation using in-house resources, and 25% would engage a consultant that does not sponsor an exchange. Only 13% indicated they would engage their existing consultant if that consultant sponsored a private exchange.

For those willing to consider a private exchange, half did not expect a potential move to take place until 2017 or 2018, while the other half were unsure of the time frame for any such move.

When asked to rank the most important factors in determining their move to a private exchange, 85% identified cost savings as most important. However, when asked about the projected percent of savings they would need to achieve in the first year in order to justify the move, more than half (55%) said they did not know. The rest of the responses were fairly evenly dispersed across a range of options from less than 2% to greater than 10% savings.

Two-thirds (66%) said giving employees more choice which may better meet their coverage needs was an important factor in determining their move to a private exchange, followed by minimal network disruption (37%) and having a mature product with proven success to manage cost and administrative capabilities (36%).

Sixty percent indicated they would want to remain self-insured if they moved to a private exchange, while only 13% indicated they would move to fully insured programs. The remaining 27% were undecided but cited concerns about moving to fully insured products for various reasons such as the ability to manage administrative and state requirements and the long-term cost effectiveness for fully insured products.

The survey also found the majority of large employers (80%) view their employer-sponsored benefits as a strategic asset for attracting, recruiting and retaining employees and an integral part of their employee engagement and productivity strategy. Only 13% view it as a required expense of being in business. Twenty-one percent are taking a wait and see attitude regarding their company-sponsored benefits and expect to delay any changes until they better understand the full impact of the Patient Protection and Affordable Care Act (ACA).

The survey was conducted online during February and March 2014. Respondents were senior human resource or benefits executives with decision-making authority within their organizations. The companies surveyed represent nearly three million employees and 5.9 million covered members, with a median employee population of 23,000. Approximately 75% of the companies that responded to the survey are ranked in the Fortune 1000, with several listed in the top 50.

An executive summary of survey results may be obtained here.

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