Private Exchanges Being Considered for Cost Savings

The Private Exchange Employer Survey, conducted by the Private Exchange Evaluation Collaborative (PEEC), finds private exchanges are one option that employers are considering to reduce their costs and administrative burdens, while increasing choice and access to coverage for their employees. Forty-five percent of employers queried say they are considering, or will be using, a private exchange for their full-time active employees before 2018.

Other findings from the survey include:

• If employers are permitted to contribute towards employees’ coverage on the public exchange in the 2017 to 2018 period, 58% would consider encouraging their employees to obtain coverage through the exchange;
• Employers are seeking comprehensive capabilities and services from private exchanges;
• Close to 70% of employers believe it is very important that their adviser is independent of any exchange they are considering;
• Currently only 25% of employers think moving to a private exchange will save them money;
• The greatest barriers to private exchange adoption relate to their immaturity, the uncertainty about their long term stability and employer’s loss of flexibility, especially as it relates to tailoring benefit plan designs;
• Interest in private exchanges extends across all industry segments and employer size, while the importance of exchange features varies between employers; and
• Employers are split on whether they will move to a defined contribution approach.

“Private exchanges have the opportunity to gain traction over the next five years as an alternative to traditional employer sponsored benefit options,” said Christopher Goff, CEO and general counsel of the Employers Health Coalition.

Laurel Pickering, president and CEO of the Northeast Business Group on Health, adds, “The survey results indicate a strong interest in private exchanges, but also uncertainty about the benefits.”

The PEEC was formed by four nonprofit business coalitions—Employers Health Coalition, Inc. (Ohio), Midwest Business Group on Health, Northeast Business Group on Health, and the Pacific Business Group on Health—and PwC US, which is an assurance, tax and advisory services firm but not an exchange provider. The aim of the collaborative is to solicit and provide unbiased, comparative information and support on private exchange strategies, and purchasing decisions.

The online survey was conducted in November with 723 respondents from a variety of industries representing self-insured and fully-insured employers. The size of the employers includes small (33% with fewer than 500 employees), midsized (26% with 500 to 2,499 employees), large (20% with 2,500 to 9,999 employees) and jumbo (21% with 10,000 or more employees).

An executive summary of the study can be downloaded here. More information about the PEEC can be found here.