Employers Look to Private Exchanges

Twenty-eight percent of midsize to large employers have looked into private exchanges. Twenty-four percent say that private exchanges could provide a viable alternative for their active full-time employees as soon as 2016, according to a study by Towers Watson. These top three factors that would cause employers to adopt a private exchange for full-time active employees:
1. 64% – They see evidence that a private exchange can deliver greater value than their self-managed model.
2. 34% – Other large companies in their industry have adopted a private exchange.
3. 26% – They can’t stay below the excise tax ceiling as 2018 approaches.

In contrast, public exchanges are not on the radar. In fact, 99.5% have no plans to exit health benefits and direct active employees to a public exchange. Seventy-seven percent don’t expect public exchanges to offer a viable alternative for their full-time employees in 2015 or 2016. The Affordable Care Act’s excise tax, which is is top of mind for large employers, could cost companies billions of dollars unless they act now to keep below government-mandated cost thresholds in 2018 and beyond. Employers that have kept health care benefit costs increases lower than average are not resting on their laurels. They are working very hard to maintain that success, said Dave Osterndorf of Towers Watson.

Seventy-three percent of employers are concerned about triggering the excise tax. Forty-three percent say that avoiding the excise tax is the top priority for their health care strategies in 2015. Osterndorf said, “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.”

Nearly three-quarters of respondents offer account-based health plans (ABHPs), with another 9% expecting to add one for the first time in 2015. Nearly 16% have adopted an ABHP as their only plan option, up from only 7% in 2012. Nearly one-third could offer ABHPs as their only option by 2015 if they follow through with plans. Private exchanges offer a new opportunity to save on health care coverage with a reduced operational burden, which is the main reason that employers are evaluating them more seriously. For more information, visit towerswatson.com.

Last Updated 06/23/2021

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