Americans have gotten used to defined-contribution retirement plans, which offer companies a more affordable alternative to traditional pensions but put the onus on employees to save for, and keep track of, their retirement investments.
Today, a similar alternative for healthcare benefits is being promoted. Although not yet widespread, at least one survey by a major consulting firm suggests the concept -- private healthcare exchanges -- is garnering strong interest from employers and consumers.
Healthcare exchanges, as those of you familiar with the Affordable Care Act know, are marketplaces in which consumers are allowed to choose the healthcare plan that best meets their needs from a menu of pre-approved choices. The ACA mandates that each state set up a public exchange by 2014.
Some in the private sector aren't waiting around for 2014, however. Firms such as Aon Hewitt and Mercer are already marketing private healthcare exchange to their clients. As you'll read in this issue's cover story, "The 'Grand Experiments,' " these exchanges allow clients' employees and retirees to use vouchers to select and pay for a selection of pre-approved health plans. In some cases, they're offered by a single carrier; in others, multiple carriers compete for the buyers' business. In all cases, proponents say, these exchanges offer employees more choice than traditional healthcare benefits do while potentially freeing HR from the administrative headaches that come with managing traditional health benefits.
The aforementioned consultancy, Booz & Co., recently surveyed more than 500 employers and 300 consumers and found strong interest in private exchanges. The survey, included in a whitepaper titled Fueling the "Consumerization" of Employer-Sponsored Health Insurance, found nearly 80 percent of the employers would prefer to purchase insurance from a private exchange instead of a public one due to "greater product choices . . . design flexibility, customer service and a general wariness of government-run entities." (You can read a full summary of the study by accessing the online version of this issue's cover story on our website, HREOnline.com, and clicking on the link.)
More than 50 percent of the employers say they would prefer multiple-carrier exchanges, while less than 30 percent would prefer a single-carrier exchange. And, the employers favor a defined-contribution model that gives employees the power to choose from a wider array of selected payor and plan options.
However, the survey also reveals that most employers are reluctant to fully distance themselves from healthcare benefits -- which consistently rank as the most important benefit, by far, to workers: Fewer than 20 percent plan to move to a "pure" defined-contribution arrangement in which they would have little to no involvement in benefits selection and management.
Some companies have gone ahead and "pulled the trigger" on private exchanges, offering them to their retirees and, increasingly, to their active employees. Yet, some trepidation and hesitancy remain. Experts interviewed in the story want to know, for example, whether exchanges will be able to provide the full panoply of wellness programs that are typically available through more traditional benefit offerings? And, can HR leaders trust these new mediums with the health of their workforce?
We expect you'll glean some important insights from the story. And, don't hesitate to send us your own questions or concerns about the private-exchange model.