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Private health insurance exchanges add a middle ground to the group market


Private health insurance exchanges are reshaping the group market.

A novelty several years ago, exchanges are growing rapidly as employers look for a middle ground between unsustainable costs at one extreme and no coverage at the other, especially for their Medicare-eligible retirees.

“Employers want to give choices while gaining control over costs,” said Maureen Scholl, CEO for exchanges at Aon Hewitt in Lincolnshire, Ill.

At the same time, exchanges, which handle plan enrollment and communications, remove much of the administrative burden from employers.

“Ask any human resources director what their biggest headache is, and they will say administering a health care benefits plan,” said John Connor, founder of Transition Assist, a Norwell, Mass.-based exchange. “If they can find a partner, like an exchange, that takes administrative responsibility off their plate but not at the expense of quality, then HR has a sustainable path.”

For retirees (see related stories here and here) exchanges mean access to a much wider range of health care plans.

“Exchanges provide more choices, and help employers and employees manage costs,” Ms. Scholl said.

“There is a lot of win-win. There is a win for employers and a win for participants,” said Bruce Richards, a partner and chief actuary in the Richmond, Va., office of Mercer L.L.C.


Bryce Williams, founder of Extend Health Inc., a San Mateo, Calif.-based exchange, says the exchange has doubled over the past two years to more than 250 employer clients.

“Employers can offer quality benefits at less cost,” said Mr. Williams, who also is managing director for exchange solutions at Towers Watson & Co., which acquired Extend Health in 2012.

Since 2010, Aon Hewitt's exchange for Medicare-eligible retirees — Aon Hewitt Navigators — has seen enrollment in plans offered through the exchange leap to 200,000 individuals from just 30,000.

More growth is certain as exchange providers tap new markets.

For example, Aon Hewitt now offers a second exchange in which employees can choose from various health care plans offered by participating insurers.

More than 100,000 employees — including U.S. employees of Aon Hewitt parent Aon P.L.C., Hoffman Estates, Ill.-based retailer Sears Holdings Corp. and Orlando, Fla.-based chain Darden Restaurants Inc. — have chosen plans through the exchange.

“There is keen interest in this marketplace,” Ms. Scholl said.

In addition, for fall 2013 enrollment, Xerox Corp. is launching an insurance exchange designed by Xerox unit Buck Consultants L.L.C. for employees.


The new exchange is designed for employers with at least 3,000 employees, said Sherri Bockhorst, a Buck Consultants principal in St. Louis.

“At launch, we expect to have over about 200,000 enrollees,” Ms. Bockhorst said.

And in December, Mercer and Connextions Inc., an Orlando, Fla.-based unit of health services company Optum, said they were launching an exchange, myCustomHealth, offering coverage from a variety of insurers to Medicare-eligible retirees.

“We have a good number of discussions under way with employers,” said Mercer's Mr. Richards.

In January, Mercer launched Mercer Marketplace, which will enable employers with at least 100 employees to offer employees a wide choice of plans provided by participating insurers.

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