Consolidation set to change the dynamics of health insurance exchanges

Major health insurer consolidation could reshuffle the private health insurance exchange marketplace, potentially to the benefit of employers.

Continued consolidation of national and larger regional insurers, many of which have launched or are developing proprietary private exchange platforms, would greatly strengthen insurers' ability to negotiate terms of participating in benefits brokers' and consultants' private insurance exchanges, if not compete outright with them, experts say.

Brokers' and consultants' “exchange models are predicated on multiple insurers competing first to even be in the exchange, and then competing on the various coverage options they offer,” said Tim Prichard, executive vice president and national employee benefits practice leader at Wells Fargo Insurance Services Inc. in The Woodlands, Texas. “With consolidation, you now have a situation where the national insurers can now offer fewer plan options in the exchanges, and they're in a much stronger position to market directly to employers with their own exchange products.”

To continue offering a range of coverage options, experts said brokers and consultants likely would invite smaller, local health insurers to participate in their exchanges, particularly in pursuit of midsize accounts.

“If the merger activity continues, I think we'll start to see exchange providers move toward more local solutions,” said Tucker Sharp, global chief broking officer of health at Aon Hewitt in Somerset, New Jersey. “We've actually already started to see it, especially when you start looking at the middle-market employer segment. Local plans will play a bigger role in filling out exchange offerings in geographies where there might not be as much choice among the national players.”