Health Groups Join to Uncover Truth about Private Exchanges

Four health-care-focused employer groups, plus PwC, ask: Do private exchanges save companies money?

Might a private health benefits exchange be right for your company’s active employees? In all likelihood you have no idea, even if you have a decent working knowledge of what private exchanges are.

Some confusion is understandable. For one thing, each private exchange differs from the others, often in quite fundamental ways. “If you’ve seen one, you’ve seen one,” says Michael Thompson, a principal in the health-care practice at PricewaterhouseCoopers, of private exchanges.

Also, the roster of exchanges includes several offered by the very consulting firms that large companies look to for advice on human-capital matters, including health benefits. PwC was a co-sponsor of research released on Dec. 12 finding that 69 percent of 723 employers, across an expansive range of sizes and industries, believe it is “very important” that their human-capital adviser be independent of any exchange they’re considering.

To be sure, PwC has skin in the game. It doesn’t offer an exchange, but it competes with the consulting firms that do — Aon Hewitt, Buck Consultants, Mercer and Towers Watson — for human-capital advisory business. On the other hand, the other research sponsors are four health-care-focused employer coalitions. “Certainly our members rate the value of having independent evaluation on private exchanges as very helpful,” says Emma Hoo, a director at one of the coalitions, the Pacific Business Group on Health (PBGH).

PwC, the PBGH, its counterpart organizations the Northeast Business Group on Health and the Midwest Business Group on Health, and the Employers Health Coalition (composed of Ohio employers) recently formed the Private Exchange Evaluation Collaborative (PEEC) to give much-needed, objective assessments of the private-exchange marketplace. The regional coalitions have somewhat differing menus of services but are generally focused on educating member employers on health-care issues and helping them arrange for better, lower-cost health insurance and services.

“A variety of brokers, consultants, payers and other intermediaries are offering private exchanges, creating a mix of potential vested interests among these service providers,” the PEEC noted in its research report. “As a result, employers are seeking an objective source of information and advice as they evaluate potential private exchange strategies and the vendors that could support them.”

The consulting firms know they can’t credibly be independent when it comes to private-exchange evaluation, Thompson says, “so they’re already sharing lots of information with us — they know we will play a role in helping employers understand these products.” The PEEC is preparing a request for information that it plans to distribute to private exchanges shortly after the new year begins.

The Cost Arrow Points… Where?
Among the chief things companies want to know, naturally, is whether they can expect to save money by going with a private exchange. At present the majority are skeptical: only 25 percent of survey respondents said they believe the move would lower their health-care costs. Still, 45 percent of the participants expect to consider using a private exchange for active employees by 2017 or have already implemented one.

4 thoughts on “Health Groups Join to Uncover Truth about Private Exchanges

  1. the idea that an insurance firm who is paid by the carriers would foster ‘vigorous price competition’ is laughable.

    It is long past time for full disclosure of brokerage arrangements in healthcare, would you buy an investment product without knowing the Expense ratio? Under the ACA it must be below 20%, and the industry reaction was the sky is falling. Where is the fiduciary obligation to plan members? If you want advice, pay for it directly and disclose the fee.

  2. To anyone who has ever been in the fiduciary space of ERISA, the consulting firms are laughable when it comes to providing independent advice. If you were to have a drink with a senior officer of such firms, they would (probably after the second drink) admit to you that their job is to generate revenue and they will do that in whatever manner than can. Historically, that manner has been to serve as gatekeeper for the community they serve rather than fiduciary to the community that they serve. That is the cultural bias of such firms and while there are certainly individual exceptions to that rule of thumb – it is still a rule of thumb. BTW, the exceptions typically leave and start their own consulting gigs when the BS gets piled too high and too deep. Everyone understands when those individuals then describe why they left. The heads nod up and down because we all know what is true.

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