Will Private Health Insurance Exchanges Overtake Affordable Care Act Exchanges?

Health insurance exchanges, online marketplaces where consumers can easily compare plans and sign up for coverage, have gained momentum from the Affordable Care Act, and now they are taking off in the private exchange market, according to an analysis by management consulting and technology company Accenture.

Indeed, enrollment doubled from 2014 to an estimated 6 million people who get their employer-sponsored health insurance through private exchanges in 2015, according to Accenture.

Private exchange enrollment will mushroom to 12 million in 2016, 22 million in 2017 and it will surpass ACA exchange enrollment by 2018 with 40 million, Accenture said. In 2015 the ACA exchanges signed up nearly 11.7 million enrollees.

Benefit consultants such as Towers Watson, Aon Hewitt and Mercer currently operate private exchanges that primarily serve mid-sized companies with between 100 and 2,500 employees, but Accenture expects the private exchange model to catch on with larger companies in part as a result of the ACA’s “Cadillac” tax on high-cost employer plans. The 40 percent excise tax may affect 38 percent of large companies and 17 percent of all American businesses when it takes effect in 2018.

More choices could be offered to employees in private exchanges, allowing them to buy lower-benefit plans that won’t be subject to the tax, according to Rich Birhanzel, managing director for Accenture Health Administration Services.

Private exchanges give employers the “option to stabilize or reduce” premiums by shifting the cost to consumers, Birhanzel said. Further, the increasing volume of defined contribution plans being offered in private exchanges may encourage employees to buy less expensive plans. In a defined contribution system companies contribute a set amount of money that employees can use to choose benefits.

But employers haven’t dropped coverage, as some initially forecast would happen under the ACA, Accenture said. Most companies view health insurance as a critical benefit, the analysis said. “As employers seek a compelling alternative, the private exchange model of reducing costs and administrative burden emerges as a clear favorite,” it said.

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