As we head into the fourth year of private healthcare exchanges—a marketplace from which employers can purchase health insurance, contribute a defined cash amount and then allow their employees to choose a health plan that best suits them—let’s pause to take stock of what we’ve learned so far.
More employers are considering—and switching—to private healthcare exchanges every year. A recent report published by Deutsche Bank indicates that the number of requests for proposals (RFPs) issued for the 2016 plan year is up by about 50 percent over the previous year. The number of companies that have decided to move to a private healthcare exchange but have not yet issued a RFP has risen by almost a third, the same report noted, increasing the expected total number of enrolled employees for 2016 by about 180 percent.
This uptake is not surprising. We find companies that have already moved to an exchange are gaining much improved and more flexible administration systems and capabilities, improved employee self-service and more employee choice. These companies have also been able to keep the overall cost for the first year of the exchange largely the same as it would have been under traditional programs and will likely see reduced healthcare costs moving forward. Because exchanges can limit costs through increased competition, improved provider network management and narrower networks, they have seen medical costs at renewal trend between -5 percent and +1.5 percent compared to a typical renewal cost trend of +7.5 percent.
Despite its growing appeal, selecting a private exchange is a tricky proposition. Each exchange is distinct from the others by its underlying philosophy, network development, contracting approach, employee engagement and pricing and product configuration. The patchwork of options is made even more complex when trying to match an exchange to a particular enterprise’s structure and culture.
Let’s say, after much strategic planning, your company decides to outsource benefits administration to support its growth plans and free up internal teams. At the same time, it wants to provide stronger benefits plans to its employees. When you set out, you are thinking of improved processes, technology and employee service. You want to gain scalability, cost effectiveness and agility to keep up with changes in the company and in the marketplace.
Potential outsourcing service providers immediately push the idea of an exchange solution on you. From what you can tell, there is opportunity to increase plan options for your employees and take advantage of improved administration in the outsource model – all at a lower cost. You set out to research exchange providers to get a handle on your options. Almost immediately, you are overwhelmed.
Which model best serves the particular makeup of your company? What is your benefits strategy? The questions begin to pile up: should you offer many plan designs or limit them? Should you offer insured or self-insured? How will these choices affect employee cost, access to providers, cost savings and satisfaction?
Exchange decisions are not hasty ones. The process—from full evaluation of options, to request for proposals, analysis, finalist visits, steering committee presentations, reporting and negotiating—may take up to nine months. Implementing your solution will take from four to six months. That means enterprises that hope to enroll employees for their 2017 benefits programs must begin the selection process now, in the summer or fall of 2015.
So far, evidence shows all this homework and the tough choices you will have to make do pay off. The number of options available creates an environment that provides plenty of choice to find the exact right scenario to meet your needs. Plus, you’re likely to see health care cost savings and gain a scalable solution that supports future growth and frees internal staff to spend more time on strategic initiatives.
ISG helps employers run an effective selection process for these complex services. We use proven tools and methods to support the entire experience, from initial discovery meetings through request for proposal, provider selection, contracting and implementation. Contact me to discuss further.