From defined benefits to defined contributions: A major shift for the market
It's easy to read the news and think the public exchanges created by the Affordable Care Act are the biggest story in health care. But most commercial insurance in the United States still is provided through employers. It's part of the reason why Advisory Board VP David Willis says the private exchanges are as important—if not more—than the public exchanges for the future of health care.
Last year, a PricewaterhouseCoopers survey of more than 700 companies suggested that 45% of employers have adopted or are considering adopting a private exchange before 2018. (Other employer-driven efforts to control employee health costs include offering employer-managed health plans.)
At the summit on Wednesday, Jim Levine—director of compensation and benefits at Church & Dwight—noted that there are about 180 different providers of exchange solutions, meaning there is significant variation in models. But as the exchanges become more popular among employers trying to control costs without scaling back coverage, Levine expects to see consolidation among exchange providers and the dominance of certain types of exchange models.
Choice in the exchanges can create smarter consumers
At Sears, Carter says private exchanges pushed employees to act like consumers when it came to health care, giving them four key things they didn't have before:
- Price transparency when it comes to unit costs and employer contributions;
- Accountability; and
- Speed, meaning the ability to change plans and carriers annually.
Or, as Carter puts it, it's the "democratization" of benefits.
John Barkett—the director of health policy affairs for exchange solutions at Towers Watson—notes that defined contributions give employees a strong incentive to carefully consider their coverage every year. Employees who select plans that are too skinny for their health needs will only make that mistake for one year, he suggests.
But to generate employer savings and help employees make the right choice for their health needs, companies and exchange operators must provide the right decision support, experts say. For instance, Levine notes that exchange solutions cannot reach their full savings potential until point-of-service decision support for consumers are in place.
The takeaway: In an effort to reduce employer health costs, private exchanges can give employees more control over and insight into their health coverage.
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