More employers are starting to sniff around the private insurance exchanges that have cropped up over the past few years, but the exchanges are still not fully understood by employers and, as a result, aren't yet being widely accepted by them.

A bit of research conducted by Tech Validate on behalf of benefits plan management and health care compliance vendor HighRoads tells us that 50 percent of employers are in some stage of private exchange evaluation. But they are more interested in adopting a self-insured model, as evidenced by the 71 percent of respondents who reported that they are on the point of adopting such a model.

Why are the private exchanges facing resistance to adoption? The researchers said that employers don't yet fully grasp how they work and how they will save them money. In addition, half of those surveyed "were unsure of how private exchanges would impact recruiting and/or retention," meaning they aren't sure current and potential employees will see them as a valuable benefit.

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Are private exchanges a viable option at this stage? Yes, said two-thirds of respondents, but as an option, it would only be one on a menu of options that employees could choose from.

"Our research shows that many employers are choosing to hold off on evaluating new private exchange options, while many more are looking at self-insured models as a way to manage benefit costs," said Bridget Lipezker, senior vice president, professional services for HighRoads. "There are many factors affecting this trend, including the employee communications and compliance dynamics of private exchanges and how employers, exchange providers and payers can achieve consistent data management to ensure effective plan management."

HighRoads said private exchanges tend to raise the following issues for employers:

  • Plan participant communications. Private exchanges add a new layer of complexity for employees and retirees, in terms of benefit offerings and the selection process, while a shift to an exchange model will raise questions and concerns among affected participants. Communications need to be crystal-clear and employees must be able to artuculate basic elements of the plan before roll-out.
  • Who owns compliance? Employers need clarity around who owns the various documents required by Employee Retirement Income Security Act and the Affordable Care Act, including the Summary Plan Description and the Summary of Benefits and Coverage.
  • Monitoring private exchange vendor performance. Employers will need to be fully educated on the defined contribution approach and have both an efficient RFP process for private exchange vendors and a robust supplier management system to monitor vendor performance.
  • Data consistency from employer to private exchange to payer and back. All players in the benefits management data lifecycle – employers, private exchange vendors and payers alike – will need solutions to ensure consistent plan data, including cost-sharing information.

Offering a longer-term forecast, a survey released earlier this month by Aon Plc, the London-based insurance broker, found that while 95 percent of employers said they would continue to offer health care in the next three to five years, 33 percent may use a private exchange to provide the benefit up from 5 percent currently.

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Dan Cook

Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.