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Sharon Cunninghis is the leader of Mercer L.L.C.’s private health insurance exchange, known as the Mercer Marketplace, which offers coverage to about 500,000 employees and retirees. In an interview with Editor-at-Large
Jerry Geisel, Ms. Cunninghis, who is based in New York, discussed a wide range of private exchange issues including their growth and appeal. Edited excerpts follow.
Q: We know the use of private health insurance exchanges by employers has grown, but do we know roughly how many employers now use the exchanges as a source of coverage for employees, retirees and their dependents; how many enrollees are in the exchanges and how those figures have grown over the last couple of years?
A: The numbers are still relatively small but growing, and there’s a lot of interest in this new delivery model. According to the Mercer National Survey of Employer-Sponsored Health Plans 2014, among large employers (500-plus employees), 3% use an exchange to provide health benefits to active employees and dependents. Among large employers that provide retiree benefits, 8% use an exchange for pre-Medicare-eligible retirees, and 15% use it for Medicare-eligible retirees. An additional 28% of large employers say they are considering moving to an exchange for active employees within five years. In some industries, that number is significantly higher. For example, 41% of large financial services employers are considering moving to an exchange within five years.
Q: How has employer participation and employee/retiree enrollment grown in the exchanges Mercer operates?
A: We are proud of the fact that 247 companies have chosen the Mercer Marketplace exchange for their active and retiree exchange solutions. These relationships cover 500,000 employees and retirees and provide exchange access for more than 1 million lives, including dependents. This represents nearly five times the reach of the marketplace when it covered 52 companies, 110,000 eligible employees/retirees and 220,000 lives a year ago.
Q: What are your expectations for the growth of private health insurance exchanges?
A: Through surveys and discussions with many clients, close to half of them tell us that within the next four, five or six years, that they are going to seriously consider moving to some type of private exchange.
Q: What are the factors driving growth in private exchanges?
A: There are a number of factors. Many employers are concerned about costs. They recognize that there are cost pressures within the health care system that will continue to grow over the next couple of years. There are certainly added costs that have come to some employers through the provisions of the Patient Protection and Affordable Care Act. There is an added concern — given the public system is actually growing in terms of its membership, such as the expansion of Medicaid in a number of states — that there will be additional cost-shifting to the employer sector.
There is an expectation that unless employers look for new types of solutions, they are going to bear a significant increase in their health care expenses.
At the same time, many employers are struggling with the already large administrative burden that is associated with their health and welfare benefit programs. And that burden is growing.
One other driver is that despite the efforts that are being made by so many employers to put together very good health benefit programs for their employees, employees often neither understand nor appreciate the value of those benefits. Employers believe with the right tools, and the right level of choice, they could increase employee appreciation.
Q: Private exchanges aren’t the only exchanges. The health care reform law created public exchanges. The simplest thing for employers to do would be to say to employees: “Here is X amount of money. Use it to purchase coverage in public exchanges.” We haven’t seen that. Why not?
A: The overwhelming majority of employers we have talked to have said they did not plan to terminate their group sponsored plans and send employees to public exchanges.
There are a number of reasons for that. While some employees would be able to qualify for public premium subsidies, others will not, making buying coverage a very expensive proposition for many employees.
The second piece is that today with most health care plans, employees can pay their share of the premium with pretax dollars. With public exchanges, when consumers go in and purchase coverage, they have to pay the full or a share of the premium and do not get that tax break.
The third piece is employers themselves. Any money they provide to employees to purchase coverage in public exchanges would be treated as taxable income to employees. So, there isn’t the tax advantage of the group system. In addition, the plans in the exchanges may be very different, such as in some cases having much smaller networks.
Q: How do you see exchanges changing in the future?
A: I believe there is a significant opportunity to innovate within an exchange. At its core, an exchange is a very large buying collaborative. With a large number of employers in an exchange, exchanges provide a distribution opportunity for insurance companies, who would like to innovate and offer high quality, lower cost options and that would be a terrific outcome for employers, insurers and consumers.