Featured Health Business Daily Story, Feb. 1, 2016

Private Exchanges Won’t Wilt From Cadillac Tax Delay: Consultants

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry. Sign up for a $91 two-month trial subscription today.

By ,
January 18, 2016Volume 26Issue 2

Private exchanges may see more modest enrollment growth for 2016 because of the two-year delay in the implementation of the excise or Cadillac tax on high-cost health plans from an initial start date of 2018 to the new kickoff in 2020. But private exchange market consultants say the rise in employers interested in switching to a private exchange to deliver health benefits in a defined-contribution mode will march on regardless.

Matt Graham, a director for Leavitt Partners LLC, which is part of The Private Exchange Coalition (www.pecoalition.com) along with Array Health, Bloom Health Corp. and Softheon, Inc., among others, says it makes sense that companies would see the Cadillac tax as a reason for eyeing exchanges to potentially lessen costs and relieve the firms of many of the administrative burdens of offering benefits. “But the delay in implementation is not necessarily going to slow down the growth of private exchanges; it may just mean the acceleration a lot of people projected won’t be happening this year,” he adds.

Those projections are all over the map. Some market consultants had predicted as many as 40 million would be in private exchanges by 2018 — but that was before the Cadillac tax delay passed in Congress last month.

Graham says from what his firm sees and observes in the marketplace, private exchanges are still growing. “And they are still somewhat of a proliferation out there, which to me suggests we haven’t quite reached the consolidation phase where we will see who the winners are, and some of the losers are, by being knocked out of the market,” he adds.

Health Plan Week

In addition, Dan Schuyler, a senior director at Leavitt, tells HPW that the continued failing of the Affordable Care Act’s SHOP (Small Business Health Options Program) exchanges leaves private exchanges in a more formidable position. “You’ve got states like Hawaii abandoning their SHOP….The private exchanges have an advantage even though the one thing they don’t have is access to tax credits, but to this point that has not been advantageous enough to get employers to move to SHOP,” he explains.

Graham says health plans will soon add differentiated insurance products on their own proprietary exchanges or via multi-carrier entities like the exchanges run by Buck or Towers Watson.

“There are some exchange models that force a difference between what product is available within an exchange versus off-exchange. But that is sort of the next phase of development for many exchanges and kind of cuts to the value proposition of a private exchange. What is it? For many employers the question is, will my employees have a better experience in the exchange because now they have a choice at some level, whether between the products of a carrier or multiple carriers,” he says.

The matter of cost, though, is never far from an employer’s mind, Graham cautions. “Is it cheaper for the employer and by extension the employee to go to an exchange?” he asks. That raises the issue of interoperability, which is a major priority for the exchange coalition Leavitt participates in.

“Hopefully sometime in 2016 we will have a proof of concept where we will look to show private exchanges and carriers how to streamline with respect to sharing plan and pricing data between two entities,” Schuyler says.

© 2016 by Atlantic Information Services, Inc. All Rights Reserved.

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