“Nearly one in four employers say they may move their employees toprivate exchanges within the next few years, but virtually none of them are considering public exchanges under the Patient Protection and Affordable Care Act, new analysis from consulting firm Towers Watson finds.
The firm’s Health Care Changes Ahead survey of 349 HR professionals at mid- and-large-sized companies found that 24 percent of those surveyed believe a private exchange will be a viable alternative for providing employee health benefits by 2016.
Meanwhile, just about everyone — 99.5 percent — said there was no way they were going to move everyone over to a public exchange. Three-quarters said they didn’t consider public exchanges to be a viable alternative for active employees within the next two years.
The viability of private health insurance exchanges has been hotly debated as these privately run systems have gained awareness as an alternative to traditional insurance models since the enactment of PPACA.
Many studies have shown that employers are cautiously kicking the tires on private exchanges, pondering whether they can safely offload their employees to one of them without suffering blowback from the troops. A PriceWaterhouse Coopers survey released earlier this month reported that 32 percent of the management personnel who responded to questions about private exchanges said they would likely move employees there within three years. PwC characterized the shift by employers to private exchanges as “more of a steady trickle” than a stampede.
Towers Watson similarly found that 28 percent of employers had already extensively evaluated the viability of private exchanges.
When asked what factors would cause them to move employees to a private exchange, here’s what the respondents told Towers Watson:
Evidence they can deliver greater value than their current self-managed model (64 percent)
Adoption of private exchanges by other large companies in their industry (34 percent)
An inability to stay below the excise tax [so-called Cadillac tax] ceiling as 2018 approaches (26 percent)
“Private exchanges are a relatively new path for many employers — one that has only recently become available to provide benefits for active employees,” said Dave Osterndorf, a managing director with Towers Watson’s OneExchange.
“However, with the Patient Protection and Affordable Care Act’s excise tax top of mind for large employers, and with the potential to cost companies billions of dollars unless they act now to keep the cost of health benefits below government-mandated thresholds in 2018 and beyond, new solutions are necessary. Even employers that have managed to keep increases in their health care benefit costs lower than industry averages are working very hard to maintain that success. Private exchanges offer employers a new opportunity to save on health care coverage with a reduced operational burden, which is the main reason they are more seriously evaluating them for their active employees.”
TW has been sending out warning signals to employers concerning their potential exposure to the Cadillac tax. In an earlier news release from the same Health Care Changes Ahead Survey, highlighting responses from managers about their views on the Cadillac tax, TW said 73 percent were “somewhat or very concerned they will trigger the excise tax based on their current plans and cost trajectory,” while 43 percent said “avoiding the excise tax is the top priority for their health care strategies in 2015.”