Private Exchanges: The Next Big Thing in Employer-Sponsored Insurance?
November 21, 2014
Not to be confused with the insurance marketplaces created under the Patient Protection and Affordable Care Act of 2010, private exchanges are a new way for employers to offer health insurance to their active employees and retirees. Private exchanges remove the employer from the enrollment process and allow employees to comparison shop through an online marketplace for health insurance and, in some cases, other benefits such as vision, dental, etc. A variety of entities, including insurance carriers, benefits consulting firms, and technology vendors, offer and administer exchanges. Exchanges vary along a number of dimensions, including whether they offer plans from a single carrier or multiple carriers, whether plans are fully insured or self-insured, and whether employers cover a percentage of a pre-defined benefit level or provide a fixed amount of money—a defined contribution—for the employee or retiree to purchase health insurance and other benefits.
According a Kaiser Family Foundation report, as many as 2.5 million people enrolled in health insurance plans through private exchanges in 2014. Although this represents only a small fraction of the 149 million people covered by employer-sponsored insurance, employers’ interest in using a private exchange appears to be growing. Some analysts project that 20 to 33 percent of employers will turn to private exchanges in the next three to five years. The number of employees and retirees enrolling in health plans through private exchanges could reach as many as 40 million by 2018.
This Forum session provided an overview of the still-evolving private exchange market and explored the implications of its growth for both employers and individuals with employer- sponsored insurance.
Alex Alvarado et al., "Examining Private Exchanges in the Employer-Sponsored Insurance Market," Henry J. Kaiser Family Foundation, September 2014.