CHICAGO – Hysteria.
That, according to Towers Watson’s Benjamin Pajak, is what many employers experience every time they read yet another headline about yet another large company shifting its workers into one of the private exchanges.
Pajak should know. As the firm’s senior vice president of strategy and business development for its Exchange Solutions unit, he gets a lot of urgent phone calls from HR executives after they’ve heard from their CEOs or CFOs wondering why their company isn’t already working with an exchange and how quickly they can join the club.
Pajak, presenting Tuesday at the annual Self-Insurance Institute of America conference, said he offers the same advice to all of those callers: “It’s a journey, and not something you’ll move into easily and quickly.”
Towers Watson, of course, is happy to have the business and expects plenty of growth in the next few years.
“I think we’ll see a few employers on the bleeding edge moving forward and then other employers will follow for a period of years,” Pajak predicted. “More will take advantage of it as time moves on.”
Towers Watson’s exchange serves self-insured employers, but many of its competitors are open to all.
Larry S. Boress, president and CEO of the Chicago-based Midwest Business Group on Health, told the audience his nonprofit was in the process of developing a database to help employers compare all of the private exchanges and their offerings.
“We think it’s critical that you … tell them where the minefields are,” he said.
Boress said he believed less than 10 percent of larger employers are likely to move into the private exchanges, “at least right away.” But he, too, projected more growth down the line.
“This is not the silver bullet that will stop insurance rates from rising,” he said. “But the idea of offloading all of that administrative complexity (by shifting into a private exchange) can be very attractive.”
There are, however, factors to consider when considering one exchange vs. another, he said. These include still-untested technology, the level of carrier involvement and financial viability.
“What are some of the variations? What’s in the core fees and where’s the up-charge?” he asked.
For some employers, there also might be a fear of ceding control if they sign up with an exchange.
“Our membership is always interested in new strategies but will sit back to see if these things are viable,” Boress said.
In a related session earlier Tuesday, another panel tackled the question of whether health care reform implementation has prompted an increasing number of companies to consider self-insurance.
The actual conversion rate from fully insured to self-insured, according to SIIA, has not been as significant as the increased interest suggests.
Julie Bobak, representing Zurich, noted that companies with fewer than 100 employees are not her firm’s “target market,” though it will take the business.
“The margins are so low and the cost is not any less,” she said. “Really, we do it to service the producer because we do so much other business with them.”
Mary Catherine Person, an official with HealthSCOPE Benefits, a third-party administrator, said companies interested in self-insuring need to understand the risk they assume and be sure they have the cash flow to cover claims.
How widely the trend spreads, Bobak said, will in part depend on how state governments respond to it. At the moment, regulators in 22 states either already have or are considering putting some sort of restrictions in place to make it more difficult to self-fund. Companies with fewer than 50 employees are likely to face the stiffest headwinds, she said.
Bobak said employers that make the shift will no doubt save money, but only over the long term, “This isn’t something they should expect in the first year.”