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Sharp growth in health exchange enrollments expected: Moody's

Sharp growth in health exchange enrollments expected: Moody's

Private health insurance exchanges, which now provide coverage to a sliver of the employer market, are likely to grow exponentially during the next few years, predicts a new report released Tuesday.

While less than 1 million employees were enrolled in private exchanges at the start of 2014, “enrollment in private exchanges could grow to tens of millions of active employees by the end of this decade,” says the report by Moody's Investors Service Inc. in New York.

Employers moving to private exchanges will include those in multiple locations “that could benefit from assessing multiple insurance carrier networks, those facing above-average increases in health care costs and/or struggling with administration of their health plans,” according to the report.

In addition, the health care reform law also may be fueling interest in private insurance exchanges. The Patient Protection and Affordable Care Act authorized public exchanges in the 50 states and the District of Columbia, principally to provide federally subsidized coverage to lower-income individuals. As of Feb. 1, nearly 3.3 million individuals — about 80% of whom were eligible for the subsidies — had enrolled in the public exchanges, according to the latest Department of Health and Human Services report. Since that report was issued, Marilyn Tavenner, administrator for the Centers for Medicare and Medicaid Services, put the enrollment count at about 4 million.

The formation and discussion of public exchanges, “raised national awareness of exchanges as a health care distribution system,” according to the Moody's report.

The big potential growth of private exchanges is not going unnoticed by major benefit consulting firms, who are investing “significant funds and management resources” to develop their exchanges, according to the report.


Those investments could yield positive financial results for the consultants and others exchange developers. “We expect these firms to build successful exchanges based on their knowledge of employee benefit plans, extensive client relationships and ample financial resources. The investments in private exchanges and the related market opportunity are credit positive for leading benefit consultants and brokers,” according to the report.

Benefit consultants that have launched exchanges include Aon Hewitt, Buck Consultants L.L.C., Mercer L.L.C. and Towers Watson & Co.

Still, while private exchanges are likely to grow significantly, not every employer will stop offering coverage directly.

“Many employers will maintain their existing customized health plans, with the employer closely involved in plan design and employee communications, given that health care and related benefits are critical factors in attracting and retaining employees,” the report said.