For many employers, the choice between partnering with a single-insurer private health exchange or a multi-insurer exchange will depend on the size and location of their benefits-eligible workforce.
Most true multi-insurer exchanges — where employees select from a menu of prepackaged health plans offered by multiple insurers — are not open to employers with fewer than 3,000 full-time workers.
The reason, according to industry experts, is that most insurers insist on a high number of eligible employees as a condition of participating in a multi-insurer exchange to minimize the threat of adverse risk selection.
“I don't think you're going to see anything in the marketplace for midsize employers in terms of a true multi-insurer exchange, at least not anytime soon,” said Don Garlitz, executive director for exchange solutions at bswift L.L.C., a Chicago-based benefits consulting and information technology services firm. “There's no tolerance at the insurer level to offer it because they're concerned about risk selection.”
On the other hand, large employers spread across multiple geographic areas might be precluded from using single-insurer ex-changes, since most of them currently are available only on a regional or local basis, experts said.
To accommodate mid-market clients, several third-party private exchanges — including Mercer L.L.C.'s Mercer Marketplace, Willis North America Inc.'s Willis Advantage and National Financial Partners Corp.'s NFP Marketplace — have developed hybrid models either in addition to or as their primary exchange offering.
In a hybrid model, employers select a single coverage provider from a group of contracted insurers that agree to offer employees a broader choice of plan designs than in a traditional arrangement.
“We think it gives our clients a better opportunity to take advantage of more favorable pricing, terms and conditions and cost sustainability. What we've found in that environment is that we're getting far more plan design options for that client,” said Jim Blaney, Philadelphia-based CEO of Willis' human capital practice. “In a traditional arrangement, you might only get two or three plan design options from a carrier, but in the exchange environment, we're seeing anywhere between six and eight plan designs that employees can choose from.”