The health care market is getting more and more complicated. More than $4 billion has been invested in digital health in each of the past two years and investment activity remains strong in 2016. Just keeping up with all the latest developments is challenging, never mind the work required to evaluate solutions, decide what to implement, and then communicate and manage them. Conversely, we continue to see consolidation in the market -- health plans, PBMs, and health systems are consolidating and developing ACOs. Fewer choices and more choices all at the same time.
Enter consumers, who are feeling the demands of being given more responsibility and having to sort through all the tools being thrown at them to help them become better shoppers. The only problem is that shopping for health care is not like shopping for a flat screen TV or for a car. Besides the complexity of understanding the specifics of the care you are shopping for, the variation in cost can be unbelievable (for example, the price for a knee replacement in the US ranges from $18k to $57k or more). Further, studies show that many think health care that is more expensive is better quality. In short, we have not yet perfected the health care shopping experience. And yet, at the same time, consumer expectations are rising. We have evolved into a culture that expects to find the answer to everything on our phones -- either Google it or ask Siri.
Is there a better answer? What if you could build a program that would help your employees live healthier lives, simplify the health care experience and save money? What if someone had already built it -- would you buy it? As health care becomes more complicated, do you have the bandwidth to evaluate every new invention? Employers are giving serious consideration to delegated solutions. Recent articles have claimed growth in private exchanges has fallen short of expectations, yet between 2015 and 2017 the percentage of large employers offering an exchange for their active employees is expected to double (from 3% to 6%) and an additional 27% say they are considering moving to an exchange within 5 years. So I’m not sure I agree that activity has fallen short of expectations -- especially considering that a lot has been learned from the first-generation programs. I agree with NBCH's new CEO, Michael Thompson, and his comment in a recent EBN interview. The proof of the approach is in what happens next. We have been able to exceed the financial expectations of our clients who have signed on to Mercer Marketplace. We are ready with next-generation features. Why not give us a look?
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.
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!
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.
There's a lot of buzz about a report issued by S&P Capital IQ, a research firm serving the financial industry, which projects that by 2020, about 90 percent of workers now covered in employer-sponsored health plans will have been shifted over to public exchanges. But I see a big disconnect between the $700 billion employers would save from 2016 to 2025 estimated in the report, and the actual net gain to their collective bottom line. Government subsidies are only available for people with incomes below 400% of FPL, and even with a subsidy those making over 200% FPL will pay substantially more for coverage in the public exchange than they currently contribute for employer-sponsored coverage. To avoid the negative impact this could have on attraction and retention, employers could increase employee pay to offset the additional cost of buying coverage in a public exchange. However, the company would lose the tax benefit of subsidizing employer-sponsored coverage, diminishing the value of funds available to put in employees' paychecks. On top of this, the "non-offering" employer penalty is taxed. Many employers who have analyzed exit strategies have not found this approach to be desirable from a financial perspective. Other benefits of shifting employees to an exchange -- decreased administrative burden for the employer, and more choice and control for the employee -- can be achieved through private exchanges, which retain the tax advantages of employer-sponsored plans.
As discussed in this Business Insurance article, Mercer Marketplace is expanding to address the needs of part-time employees. Mercer's partnership with GetInsured will enable employees to enroll in individual health insurance products in the public exchange as well as from the private market. Mercer CEO Julio Portalatin says, “Most employers don't have a single, uniform workforce, but a collection of different groups — including part-timers and retirees, each with a very different set of benefit needs.” For more information, see the full press release.
Private exchanges represent a new way to provide employer-sponsored benefits that is advantageous to both employers and employees. A well-designed private exchange allows an employer to better manage costs while delivering greater flexibility and choice to its workforce, so interest in them is high, according to Mercer’s latest National Survey of Employer-Sponsored Health Plans. In fact, a sizeable share of US employers expects to move to a private exchange within the next two to five years.
“Private exchanges have generated an enormous amount of interest in a short time. Our research shows that one-fourth of US employers are considering switching to a private exchange in just two years, while 45% would consider moving to an exchange in five years,” says Eric Grossman, Mercer Marketplace US Active Exchange Business Leader.
Among the diverse group of employers that moved to Mercer Marketplace in 2014, simplified administration and current/future cost control are the top reasons given for the move, he notes.
Private exchanges are gaining momentum with employers. Mercer's national survey of employer health plan sponsors found that one-fourth of employers are considering moving to a private exchange during the next two years - and one-half are considering moving within five years. In 2014, 30 Mercer clients successfully implemented our private exchange, Mercer Marketplace, with favorable employee experience and anticipated cost savings.