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BY ANGELA DOWLING
What if I told you that amidst all the press and public discussion surrounding health insurance exchanges like Cover Oregon, there is another emerging option that experts predict will actually surpass public exchanges in popularity in the next few years.
I’m talking about private exchanges. Already this year more than three million people have used them to sign up for coverage through defined contribution plans. And depending on which consultant you believe, between 40 and 80 million Americans could receive their coverage through private exchanges – rather than directly through their employer like the majority of us currently do – by 2018.
As this three-minute video explains, the concept of defined contribution in a private exchange is relatively simple and follows much of the same framework as the shift in retirement benefits from pensions to 401(k) plans. Defined contribution allows an employer to give an employee a set amount of money to visit an online private exchange and shop for health insurance. Private exchanges can host multiple plans from as few as one or as many as five or more insurance carriers. Oh, and they are Affordable Care Act (ACA)-compliant too.
Employers like private exchanges because they can control costs and more accurately forecast future benefit expenses, as well as forgo the administrative burden of managing benefits on behalf of their employees. On private exchanges you can also offer plans that weren’t historically available alongside one another — options like accountable care organizations, PPO plans and HSA accounts. For employers whose health benefit contributions to employees have nearly doubled since 2003, you can see why this is quickly becoming a compelling alternative to traditional group insurance.
Employees may see this growing trend as unwelcome news, but let me point out some bright spots. First, the backlash against ACA reform amongst select employers remains real, especially those mid-sized businesses toeing the employment line that triggers mandated coverage. Defined contribution provides an option where employers can confidently provide coverage to employees while continuing to grow their businesses with this fiscally-predictable solution.
Second, private exchanges allow employees to select their own plans rather than being forced to accept a one-size-fits-all employer-picked plan option. This means employees can buy up in coverage, or for younger and healthier populations they can choose plans with lower premiums.
Third, this shift in benefits compensation between employers and employees will give individuals more visibility into the true costs of care. Currently, the U.S. spends far and away the most of any country in the world on health care. The only way we’re going to significantly reduce the cost of care is if we collectively adopt healthier behavior. And the most effective means of changing people’s behavior is by impacting their wallets. As individuals take on more responsibility for selecting their own coverage and navigating the health care system, this financial transparency is sure to make more and more Americans think twice about a fast food dinner or forgoing a trip to the gym.
This year Regence launched our own private exchange called Regence Marketplace here in Oregon for companies with 100 or more employees, and we’re expanding this option to businesses with 51+ employees in 2015. Employers are looking for more options in order to successfully navigate today’s shifting health care landscape, and we’re confident that defined contribution in a private exchange will be a popular choice for Oregonians going forward.
To learn more about this growing trend in health insurance, read our white paper: “Defined Contribution: A familiar model, redefined for health care.”
Angela Dowling is President of Regence BlueCross BlueShield of Oregon
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Former Chief Medical Officer for Saint Alphonsus Health Alliance brings 30 years of healthcare industry expertise and innovation.
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