Private Health Care Exchanges Enroll More Than Predicted- why you should care‼️

Read stories such as the one below and you may get the impression employers are seeking to help employees by giving them greater choice. The fact is that many, if not most, of the employers were self-insured before using a private exchange. In addition, many employers also offered a choice of plans, frequently using different carriers. What employers paid insurers was a fixed fee for administration. Claims were paid at actual cost by the employer.

So, you might ask why an employer would now switch to an insured plan(s) which typically are more costly than self-insurance. The answer is not in competing health insurance companies. After all, every insurance company is required to provide similar coverage under Obamacare and all are limited in their administrative fees. In addition, all insured plans are subject to state laws, taxes and mandates as well. That is not true for self-insured plans.

The answer to why employers are going this route is in these words “companies typically allocate a specific amount for employees to spend on health insurance.” By fixing their contribution amount and increasing it (if at all) by a factor unrelated to the actual increase in premiums, employers have full control over their costs while employees assume the risk and cost beyond the employer contribution. In effect, employers are switching health benefits to a defined contribution approach. It’s just like terminating a traditional pension plan in favor of a 401k plan.

At the same time, to cope with the new premiums, workers select plans with lower premiums, but higher deductibles and out-of-pocket costs thereby placing some of them at greater financial risk. The winners in all this are employers, insurance companies and the consulting firms setting up the private exchanges. 😡 The losers are … well, you know the losers. 👎

NOTE: Private exchanges are also being used by employers for retiree health plans, including Medicare supplemental coverage.

Employers are moving more quickly than forecasted to offer health insurance to their workers through private exchanges, according to new data from Accenture, a consulting firm.

Three million people signed up for workplace health coverage for this year through private exchanges, Accenture said. That’s roughly three times the number of people the firm had estimated last fall would enroll for coverage through the private exchanges — online systems that are separate from the state and federal health insurance marketplaces…

Accenture estimates that total enrollment in private exchanges by active employees will reach about 40 million by 2018, surpassing the number of people enrolling through state and federally funded exchanges. (Currently, the federal government says eight million people have signed up for health insurance through the public exchanges set up by the Affordable Care Act)…

Some employers are shifting employees to the exchanges to control costs and reduce administrative burdens, and to give workers more plans to choose from. (The idea is that offering plans from multiple insurers will help lower costs through competition.) While details of the exchanges vary, companies typically allocate a specific amount for employees to spend on health insurance, and then workers choose from a menu of options.

via Private Health Care Exchanges Enroll More Than Predicted – NYTimes.com.