Employers vetting health exchanges more closely
CHICAGO (Dec. 15, 2014) — Private health insurance exchanges will continue to draw broad interest from employers in 2015, but new adoptions will likely be limited to benefit programs for certain types of employee groups as employers start to ask what they have to gain from using them, according to a new report by Wells Fargo Insurance Services USA Inc.
Employers with large retiree populations — as well as firms in industries with traditionally low-wage or part-time workforces — are more likely to gravitate toward private exchanges as an alternative means of providing healthcare benefits next year, Wells Fargo said in its 2015 Employee Benefits Outlook report.
“There are good reasons for going into an exchange,” said Tim Prichard, Wells Fargo's executive vice president and national employee benefits practice leader in Woodlands, Texas. “Retiree populations and high-turnover, low-income or part-time workforces are probably a good fit for an exchange solution. But we've seen very few employers outside of that moving to exchanges for active employees.”
Mr. Prichard said much of employers' reticence toward private exchanges has been the result of lingering uncertainty regarding their potential for reducing overall healthcare costs.
“I think the pendulum has swung back from a point where clients wanted someone to help them vet all of the different exchange solutions that are out there, to a point where they're starting to ask about what they really stand to gain by going with an exchange,” Mr. Prichard said.
“We're also starting to get questions from clients about the objectivity issue when it comes to some exchange providers,” he added, noting that most of the largest U.S.-based benefits consultants have launched their own proprietary private exchange solutions within the last two years.
“Fundamentally, employers are looking for a diamond in the rough,” Mr. Prichard said. “There is a role for private exchanges, but it needs to be well-vetted, and the employer's goal needs to be clearly defined. If the goal is pure cost savings, and you don't change anything else about your benefits program, I don't see how you get there.”
Wells Fargo's report also noted a growing interest among employers in the concept of defined contribution strategies for group healthcare benefits, though it also cautioned employers against the possible financial effects those strategies would have on individual employees.
“Defined contribution I think is a smart thing for employers to look at, because they need to get to a point where they can budget for their costs on an ongoing basis,” Mr. Prichard said. “But from an industry perspective, what gives me concern is the prospect of employees paying a greater percent of their own premium on a continually escalating basis. It's going to get to a point that it becomes unsustainable.”
According to the report, employee contributions to their healthcare premiums have increased by 212 percent since 1999, outpacing the growth rate for healthcare premiums overall, at 191 percent, and employees' earnings, at 54 percent.
“If you project out,” Mr. Prichard said, “the trends just don't look very favorable for employees."
This report appeared on businessinsurance.com, the website of Crain's Business Insurance magazine, a Chicago-based sister publication of Tire Business.
Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].