Every time a big company makes the leap to a private exchange, the industry pays close attention – especially Mercer’s own Sharon Cunninghis, North American Health & Benefits Leader. In this Human Resource Executive article, Sharon shares her thoughts on private exchange trends and opportunities, including best practices for employers who are making the switch. Her advice: “Help people understand the new benefits program, how it differs from what was in place previously, the added advantages of the new program and available support services,” she says. “Secondly, make sure that there’s a good, solid project plan from an implementation perspective – technology, new administrative processes and tools.” Sharon goes on to explain why, ultimately, health and benefits solutions of the future, Mercer Marketplace 365 in particular, will be seen as a “true healthcare destination” – a comprehensive platform that goes above and beyond today’s typical private exchange, serving as a resource not just at open enrollment, but throughout the year. With 6% of large employers either already using a private exchange or planning on it for 2017 – and an additional 27% considering adoption within 5 years – this is a trend to watch.
A growing number of employers are moving Medicare-eligible retirees to special retiree medical exchange platforms. Mercer’s National Survey of Employer-Sponsored Health Plans found that 27% of retiree plan sponsors are using an exchange to provide coverage to Medicare-eligible retirees in 2016, up sharply from just 15% two years ago. The programs are attractive because they offer a wider range of choices for retirees and also take on benefit administration.
Now, the combination of the public exchange and expansion of the individual market off-exchange has opened up opportunities for pre-Medicare-eligible retirees as well. The individual marketplace for pre-65 retirees is evolving. Characteristics typically associated with the Medicare marketplace -- rate stability, standardized plans, carrier availability and longevity -- appear to be more challenging in the pre-65 market.
Recently, several insurance companies have announced their plans to exit the public exchange in certain markets, raising questions with employers about the availability of exchange coverage and off-exchange coverage for pre-65 retirees. Michelle Andrews recently addressed this question in Kaiser Health News. While some states, like the District of Columbia, require the insurance company to offer coverage on the public exchange in order to offer coverage off-exchange, that is not true in every state. But while carrier participation in the pre-65 market has fluctuated, with some national carriers leaving the market or scaling back on their higher value plans, the total number of carriers has remained relatively balanced, as new entrants and smaller, regional carriers gain market presence.
Typically, employers considering a move to a pre-65 retiree exchange are seeking reductions in cost, risk, and administrative burden for this population. Or, based on a geographic footprint analysis, they have found that their pre-65 retirees will likely see savings and choice in the individual market. Often both are the case. It’s important to keep in mind that pre-65 individual coverage options may offer advantages over traditional group insurance in terms of participant personalization of choice and employer administration relief. Issues arising in a handful of markets around the country shouldn’t necessarily mean putting the brakes on a strategy to move retirees out of group plans when there may be a better alternative for them and the organization.
Given that this is an election year and the political landscape surrounding health care reform has been heating up, we can expect little change or significant change in the Affordable Care Act regulations depending on which party gains control of the Senate, House of Representatives, and the White House. For now, the public exchanges are in flux and could create challenges in the pre-65 retiree demographic. For employers looking for alternatives to a traditional group plan for pre-65 retirees, it’s important to do your homework.
We’ve been tracking employer adoption of, and interest in, private health exchanges through Mercer’s National Survey of Employer-Sponsored Health Plans for the past few years. Currently 6% of large employers either use an exchange now or will implement one this year for 2017. That’s doubled from 3% using an exchange in 2014 – a strong rate of growth, even if the numbers are still small. Perhaps more telling, more than a fourth of large employers say they are considering moving to an exchange within five years.
To look more closely at how one exchange works, we must turn to a different source of data: the 222 employers that now provide benefits to their active employees through Mercer Marketplace. We now have three years of data behind us on the cost reductions our clients are experiencing with Mercer Marketplace.
- On average, they have saved 9% (and up to 15% in some cases) on their benefits plans. That averages $975 per enrolled employee.
- While the average health benefit cost per employee increased 3.8% from 2014 to 2015 across the market, Mercer Marketplace clients experienced an average year-over-year increase of only 1.6%.
- One of the keys to savings on both sides – employer and employee -- is that employees are more informed in their decision-making. For some, that means realizing the benefits of enrolling in higher-deductible plans. In fact, 56% of enrolled employees choose high deductible plans on Mercer Marketplace. That’s much higher than the average 29% enrollment reported by large employers that offer a HSA-eligible consumer-directed health plans as a choice.
Contributing to these savings is the enhanced purchasing power, network influence, state-of-the-art wellness program and buying coalitions that are all part of the Mercer Marketplace value proposition. And, as Tracy Watts describes in her recent post, these savings are achieved while the employer’s administrative burden gets lighter, not heavier.
Medicare Advantage premiums are expected to increase around 3.5% in 2017. While this increase is in line with what we see for active medical plans, we need to keep in mind that the target membership for these plans is retirees, many of whom are on fixed incomes. The Medicare Advantage plans are popular with seniors because they typically include some services not included in traditional Medicare. About a fifth of all large employers (21%) provide medical coverage for Medicare-eligible retirees today on an ongoing basis, and an additional 11% still provide a plan to a closed group of Medicare-eligible retirees. Employers have gravitated to private exchanges as a way to offer retiree medical coverage. Among those that sponsor retiree coverage, 13% now offer Medicare-eligible retirees a private exchange, up from 9% last year, and 15% will use an exchange for their 2017 plan year. An additional 18% of retiree plan sponsors say they are considering moving their Medicare-eligible retirees to a private exchange within five years.
Employee Benefit Adviser has recognized Mercer’s Sharon Cunninghis, the global leader of our private exchange Mercer Marketplace, as one of 17 private exchange leaders who are shaping the future of health care. “These executives from all parts of the industry are leaders in the space, forecasting trends and serving as ushers for what some are calling a new era of health care,” says the article. Indeed, Mercer’s National Survey of Employer-Sponsored Health Plans 2015 found that 6% of large employers either already use a private exchange for active employees or will by next year’s open enrollment – a 50% increase year-over-year – and that an additional 27% are considering switching to an exchange within five years.
We applaud all those honored by EBA for their work at the forefront of this innovative space. Sharon’s leadership has been instrumental in making Mercer Marketplace a standout solution in a fast-changing industry. Congratulations to Sharon – a well-deserved honor!
Private benefit exchanges and the Affordable Care Act (ACA) are tied together in several ways. Most obviously, the ACA introduced the concept of the public health exchange. But it also created new challenges for employer health plan sponsors that called for new solutions. It added serious administrative complexity, as employers were required to comply with new tracking and reporting requirements. It added cost by imposing new standards for plan value and coverages. At the same time, it greatly increased the need for employers to reduce cost by creating a future 40% excise tax on high-cost plans. For the many employers that see their benefit program as a key tool to attract and retain talent, this has meant rethinking fundamental strategies.
Our private benefit exchange, Mercer Marketplace™, was designed to let employers take advantage of group purchasing power and marketplace competition while retaining the flexibility to offer a benefit package tailored to the needs of the organization and the workforce. Without adding to their administrative burden, employers can offer multiple health plans with a range of values, allowing employees to choose just the level of coverage they need. Most Mercer Marketplace employers offer at least three options, and almost a quarter offer five.
As we’ve seen in our first two years of operation, employees tend to buy down, suggesting that overinsurance has been a factor needlessly inflating cost for both employer and employee. Nearly 60% of our clients’ employees selected a high-deductible plan for 2015. Offering an array of voluntary coverages helps employees fill any gaps in coverage and makes it easy to direct the money they’ve saved on medical coverage to pay for other insurance needs. In Mercer Marketplace, employers have the option to set defined benefit or defined contributions and choose between insured and self-funded medical. We continue to innovate to ensure that Mercer Marketplace clients sustain a long-term cost advantage.
The most recent data from Mercer Marketplace tells us we got it right. Employers moving to Mercer Marketplace for the first time typically see immediate cost savings of up to 15%. Our clients are seeing sustained savings in year two as well. The total average cost increase for Marketplace clients with January 2015 renewals was just 1.5% with no plan design changes, compared to the national increase of 4.9% after plan design changes (approximately 7% before design changes) projected by employers in Mercer’s most recent National Survey of Employer-Sponsored Health Plans.
The ACA may have been the initial catalyst for private exchanges, but they in turn have become a catalyst for change and innovation in employer benefits. The phenomenal growth we’ve seen in Mercer Marketplace in 2015 — with enrollment increasing five-fold in just one year — shows that employers are more than ready for what we’re offering: an easier way to provide choice, so that consumers can better manage their benefit dollars; superior customer service; and, most importantly, a truly competitive marketplace that drives innovation.
It’s going to be a busy open enrollment season for Mercer Marketplace. In 2014, its first year of operations, Mercer’s private benefits exchange provided access for 52 companies, with 220,000 eligible employees, retirees, and dependents. For 2015, those numbers have grown by about a factor of five: 247 companies have chosen Mercer Marketplace to provide access to more than 1,000,000 lives. Additional enrollments for 2015 will continue throughout 2014.
“The growth in people and companies attracted to our exchange platforms is a powerful demonstration of the broad applicability of Mercer Marketplace solutions,” said Julio A. Portalatin, our President and Chief Executive Officer. “Our clients and their employees are confirming that we offer the most flexible and complete private exchange in the market that meets the real needs of a wider spectrum of companies. Further evidence of our momentum is the acquisition of 40 new clients not previously served by Mercer’s health business in addition to our continued growth with existing clients.”
A 2014 analysis of purchasing behavior on Mercer Marketplace showed that, given the opportunity to choose from a range of benefit options, many consumers purchased lower-cost medical plans. That, combined with access to Mercer Marketplace network arrangements, care management and prescription drug programs, allows employers to achieve up to 15% medical plan cost savings. In addition, Mercer Marketplace drove an average savings of 10% on the cost of life and disability benefits. These savings are enjoyed by both employers and employees.
“These savings result from Mercer Marketplace’s purchasing power combined with consumer decisions to purchase coverage that is more appropriate to their personal needs,” said Sharon Cunninghis, Mercer Marketplace Leader. “The fact that employers were able to achieve significant cost savings while offering their employees the ability to personalize their benefits is exciting news. This satisfaction from both companies and individuals gives others confidence in the exchange experience and positions this as one of the standard benefits models of the future.”
In addition to the employer active and retiree clients, several companies have selected Mercer Marketplace as the platform for delivering voluntary benefits, with 330,000 employees (730,000 lives including dependents) eligible to select benefits through this program. Mercer also provides access to individual medical insurance coverage to an additional 750,000 individuals through our relationship with GetInsured. While enrollment in these offerings may initially be modest, using Mercer Marketplace for delivery of voluntary benefits and individual medical insurance provides an avenue for both employers and employees to begin to experience the advantages the exchange platform offers.
The slow growth in Medicare spending has meant slow growth in premiums for Medicare Advantage Plans. With the average monthly premium rising by just $2.95 in 2015 -- and 61% of enrollees seeing no increase at all -- CMS is projecting that enrollment will grow by about 3% in 2015, to reach an all-time high of just over 16 million. This article suggests that controls on Medicare spending built into the ACA are one reason for the moderate growth in premiums, but another may be that enrollees are choosing less expensive plans, with more restrictive pharmacy benefits and higher out-of-pocket costs. Retiree medical exchanges make it easier for employers to offer a range of Medicare Advantage plans, giving retirees the opportunity to select the level of coverage that suits their needs. For example, Mercer Marketplace Medicare Exchange (Transition Assist) includes a wide variety of individual Medicare Advantage options offered by national and local carriers. The availability varies by geography, but most retirees will have two to five Medicare Advantage options, some with zero premium.
The confluence of a number of factors has Chronic Hepatitis C (CHC) exploding on the radars of employers who until now gave it relatively little attention based on low prevalence and minimal therapy costs.
First, the Centers for Disease Control recently expanded screening guidelines to include testing of the entire population between 49 and 69 years of age in an effort to increase diagnosis among the estimated 3.2 million Americans who carry the virus and aren’t even aware they have it. At the same time, under the ACA, 8 million previously uninsured individuals (among whom it’s estimated the greatest numbers of undiagnosed are concentrated) now have health care coverage, potentially increasing utilization and demand for CHC treatment. And, a much-buzzed-about $1,000-per-pill breakthrough drug therapy — now standard on a number of plan formularies — has many gasping and questioning its value.
Indeed the winds have changed. These new dynamics are presenting unprecedented challenges for reconciling the clearer public health interests with the murkier, unexpected economics of extremely high therapy costs and the highly variable planning and budgeting around paying for them.
In the case of CHC, the newest therapies offer a 90% cure rate, fewer side effects, and just 12 weeks of treatment (compared to a 50% to 65% cure rate and 48-week treatment duration of earlier therapies) but carry a price tag ranging from $85,000 to $300,000 per patient (covering both the drug and patient care), or up to nearly eight times that of previous therapies.
And CHC is merely a harbinger of the tensions that are soon expected to play out across many other disease states, where new drug therapies will offer some combination of higher cure rates, shorter treatment durations, and better side-effect profiles, but because of steep R&D costs and limited patient volumes to drive prices down, will be equally as expensive.
The reality is, despite the costs, these new breakthrough drugs offer highly effective treatments to individuals who desperately need them. How do you tell patients they can’t have or have to pay out of pocket for a substantially better therapy because of budget constraints? This is a fundamental issue, not just for employers or those in employers’ traditional plans, but also for individuals in private and public exchanges, and Medicaid.
Moving forward — particularly in the context of health care reform — everyone will have to start thinking about these dynamics in new ways and determine if and how they will cover the costs of therapy.
For example, given the ACA’s goal of increased access, there may need to be a requirement to limit access or specific treatment protocols to patients whose unique gene type is proven responsive to the new therapies. In addition, patients will require higher-touch clinical and behavioral health case management than typically provided in the past through delegation to Centers of Excellence and physician communities, particularly given the much higher level of financial investment at stake. And even more creative solutions may have patients dusting off their passports to seize what many believe could be increased opportunities to reap the benefits of pharmacy medical tourism. (Some countries are able to provide the same CHC therapies for less than one-tenth of the cost in the US.)
But what can individual employers do now?
The first step is to work with their medical carrier or pharmacy benefits manager to assess the potential CHC prevalence in their plan. Once the magnitude of the problem is established, employers will be in a much better position to take advantage of whatever solutions emerge once the storm clears.
In this article, having a choice of medical plans is identified as a disruptor. Three things to consider: First, most people with coverage from their employer only have one or two medical plans available to them. An exchange, whether private or public, does offer up more choice. Secondly, as we know from our first-year experience with the Mercer Marketplace private exchange, when you give people helpful decision support along with choice, the majority will "buy down" to a less expensive plan because they discover that they have been over-insured. Third, it is well documented that millions of dollars are spent annually in the U.S. on care that is inappropriate or unnecessary. Looking up prices, actively negotiating with providers, and using home remedies or over-the-counter medicines -- all of which tends to happen when health care consumers have more skin in the game -- is a good thing. The more active we all are as consumers, the better.
A year ago, the consultancy Accenture estimated that 1 million individuals would enroll for health coverage through a private exchange in 2014. Last week, in a report that's being widely circulated, they tripled their estimate -- now they say that 3 million individuals are enrolled through an exchange. While some very large employers made the move to private exchanges for 2014, driving up enrollment, the main reason was simply higher-than-expected demand. I'm not surprised they were surprised -- we got a hint of the phenomenal interest in this new model last fall when we tabulated the results of our 2013 survey and found that a quarter of all employers were considering moving to an exchange within just two years, and nearly half were considering moving within five years. The Accenture report confirmed the trend we've seen with the first employers to sign onto Mercer's own private exchange, Mercer Marketplace -- when employees have the choice, they select a lower level of coverage, saving money for themselves and their employer.
Interesting article in BI. Mercer Marketplace is available to companies with 100 or more employees. We have partnerships with more than 25 medical carriers, including many BCBS plans. Mercer's platform provides access to the full suite of benefits including medical, dental, vision, life, disability, and voluntary benefits. The decision deadline for January 1, 2015 effective date is in July.