The New Wave Of Private Health Insurance Exchanges

Traditionally, health insurers operating in the group insurance markets have offered Defined Benefits (DB) based health plans to their clients

. The upcoming health insurance exchanges have triggered a trend where Defined Contribution (DC) plan models are rapidly becoming the more preferred between the DB/DC insurance plan models. To capture the expansive insurance markets before the health insurance exchanges come into operation, several healthcare businesses have revealed their intention to set up private health insurance Exchanges.

A survey conducted earlier this year by a leading global management consulting firm, reported that concerns such as high costs of employer-sponsored healthcare has led many employers to consider a shift in their health insurance coverage model from defined benefits to defined contribution. In the defined benefit model while it was the responsibility of the employer to select and define health benefits & programs for the employees, in the defined contribution model, employers need to allocate defined amounts to each employee and the responsibility to purchase benefits is shifted directly to employees.

Private Health Exchanges provide a simple alternative to employers for purchasing their insurance. The survey identified that large number of employers are becoming increasingly curious about the private health insurance Exchanges. Two different models of Private Health Exchange are available to employers. BCBS Minnesota, Highmark, Wellpoint etc. have opted for a single carrier exchange that is created by single payers to promote their products. Aon Hewitt, Walgreens, CaliforniaChoice are few examples of multi-carrier Exchange that would link employers and individuals to variety of health plans from multiple Exchange-participating health insurance carriers.

Several insurers proposed Private Health Insurance Exchanges largely as an alternative to the State sponsored Public Health Insurance Exchanges. While several payers such as Wellpoint, Highmark etc., that function in the medium or large group markets have drawn up definite plans to set up private health insurance exchanges, many others insurers are cautiously approaching the rising trend. Healthcare businesses actively pursuing Private health exchange plans can expectedly enjoy an early-bird advantage and insurers that are adopting a wait-and-see strategy would need to monitor the private exchange market closely to avoid being left behind.

Payers setting up their own private health Exchanges would need to ensure that their Exchange provides a strong customer support to web consumers. The Exchange business models should be designed such that customers have ready access to a responsive call centers and other web help options.

There are a few private health Exchanges that are currently servicing individuals & businesses in individual & group markets. By the time State-sponsored Health Insurance Exchanges come into operation, several more insurers are lined to step into the market with their Private Health Insurance Exchanges. The competition is likely to become even more competitive as the January 1, 2014 deadline for Public Health Insurance Exchanges approaches near.

by: Shaun Mike

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