The Downside of Private Exchanges

Employers that pursue a private exchange/defined contribution strategy without managing healthcare costs could be engaging in elaborate cost-shifting, says Jim Blaney, CEO of Willis North America’s Human Capital Practice. In a recent blog post, he explains that the majority of private exchanges focus on aggregating volume to drive cost down, which is not a sustainable cost containment measure. Once the employer’s defined contribution is exhausted, the employee bears the entire cost. Failing to bring down health care cost inflation could lead to a situation in which employees can’t afford health care in the exchange environment, he said.

“The way to make this model sustainable is to integrate wellness programs and other health management initiatives into the exchange strategy to reduce consumption of medical resources. Employers who have invested in worksite wellness and total population health management have seen increased productivity, reduced absenteeism, and lower health care costs,” he said

According to Blaney, the private exchange model is particularly appealing to employers with seasonal workforces and those in the retail and hospitality sectors. Also interested in private exchanges are employers that will be subject to mandates to provide coverage under the Affordable Care Act. For more information, visit

Last Updated 01/19/2022

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