Money & Business

Growth Accelerating for Private Insurance Exchanges, Report Says

By / Apr 13, 2015 (iStock/Thinkstock)

A new report by Accenture predicts that enrollment in private health insurance exchanges could grow dramatically over the next three years. A likely driver: the “Cadillac” tax on high-cost insurance that is set to go into effect in 2018.

Enrollment in private health insurance exchanges has doubled in the last year, a trend that will likely continue over the next several years, according to a new report by global management firm Accenture.

Private exchanges are increasingly attractive to employers, as they serve as online marketplaces where employees may pick from a range of plan options. Faced with increased costs and a barrage of Affordable Care Act (ACA) administrative requirements in the coming years, employers are often choosing to outsource the task and have employees enter a private exchange.

Private exchanges enable employees to take a set amount of employer benefit and determine how generous a plan to purchase. Midsize employers with between 100 and 2,500 employees are responsible for the majority of the recent growth.

With 150 million workers receiving employer-sponsored health insurance, the market share held by private exchanges is still relatively small. Yet that may continue to change, as employers will face additional ACA taxes in the coming years. Accenture predicts that by 2018, up to 40 million workers will access employer-sponsored health insurance through a private marketplace, making them more popular than state- and federally funded exchanges.

One driving force behind increased adoption rate is likely to be the “Cadillac” tax on high-cost health insurance that goes into effect in 2018. According to the American Health Policy Institute, the tax is projected to affect 38 percent of large employers and 17 percent of all American businesses.

Private exchange participation rates may also increase after the ACA employer shared-responsibility provision went into effect on January 1 this year. Under this provision, employers with at least 50 full-time employees (or a combination of full- and part-time that is equivalent to 50 full-time employees) must pay a large fee if they do not provide health insurance that meets affordability levels and provides a minimum standard of coverage.

“As employers seek a compelling alternative, the private exchange model of reducing costs and administrative burden emerges as a clear favorite,” Rich Birhanzel, managing director for Accenture Health Administration Services, told Bloomberg BNA last week.

Chris Vest, CAE

Chris Vest, CAE is director of public policy at ASAE. More »

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