Is a Private Exchange Right for Your Organization? Top 5 Strategic Considerations.

Given the unpredictable economy and ever-changing legislative landscape, employers are rethinking traditional year-to-year trend mitigation as their primary health care strategy. Instead, most large employers are actively pursuing strategies that help control costs and require participants to take a more active role in their health care planning. One strategy employers are evaluating is the use of private exchanges, which offer more predictability around future health care costs.

While private health exchanges may not be a fit for every employer, they are increasingly attractive to organizations that want to offer employees health care choice while mitigating future cost trends and lessening the administrative burden associated with sponsoring a health plan.

Based on our experience over the last three years, here are the most common and important considerations to contemplate when evaluating if a private exchange is right for your organization:

1. Value perception

  • A private exchange might be right for you if:
    • You are aligned to – and comfortable – monetizing your commitment to your employees in the form of a fixed subsidy, and treating health care as a form of compensation. In general, companies are a better fit for a private exchange strategy when they do not believe the health benefit plan design should differentiate total rewards.
  • A private exchange might not be right for you if:
    • You believe your employees find value in your unique health benefits package beyond the financial value of the subsidy. This may include items like care and/or claims management and industry- or company-specific plan designs.

2. Plan design and vendor management

  • A private exchange might be right for you if:
    • You would prefer to invest your human capital resources in areas like employee health, reduced absenteeism and improved workforce performance instead of managing plan designs and medical plan vendors. In fact, you believe the competition component of the exchange will motivate vendors as they try to attract and retain individual members.
  • A private exchange might not be right for you if:
    • You would prefer to maintain complete autonomy of, and believe you drive value through, your company’s individual plan design. You also want to maintain very close ties to your medical plan administrators and believe you are differentiated through vendor management.

3. Vendor choice

  • A private exchange might be right for you if:
    • You want to offer your employees a wide range of health plans and carriers at different price points to help them beste online casino find the best fit for their individual needs. Based on year one results, we know that 93% of enrollees surveyed said they liked being able to choose their own carrier.
  • A private exchange might not be right for you if:
    • You believe you best serve your employees by selecting medical plans and carriers for them.

4. Cost drivers

  • A private exchange might be right for you if:
    • You believe that exchanges – by nature – will mitigate costs through competition, standardization and discount optimization.
  • A private exchange might not be right for you if:
    • You believe you can continue to mitigate costs through traditional means like plan design and direct contracting.

5. Range in geography and demographics

  • A private exchange might be right for you if:
    • Your company is geographically dispersed and has a diverse population, as a private exchange helps to leverage best-in-class carrier partners by region and range of plan choices.
  • A private exchange might not be right for you if:
    • Your company’s locations are centralized and there is not a wide variety in terms of population needs.

To learn more about how Aon Hewitt can help you decide if a private exchange is right for your organization, please contact us.

Ken Sperling is Aon Hewitt’s national health exchange strategy leader.

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