We find ourselves in the middle of one of the greatest wealth transfer periods of all time. Those with wealth must decide whether they want to make transfers, and if they do, they must decide how much, to whom, when and in what structure?
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The exchange operates similarly to the state’s public health-insurance exchange, Connect for Health Colorado. Employees of Estes Park School District can go online and choose the plan that’s right for them.
The Estes Park district used the Denver-based insurance brokerage HUB International to set up its program. Its exchange offers far fewer options than the public exchange, with only UnitedHealthcare and Anthem Blue Cross and Blue Shield currently involved, but users can answer a set of questions that allow the program to recommend plans for them.
Private exchanges allow employers to provide coverage to their employees with less administrative legwork, and sometimes for less cost than through traditional means. Those business owners who choose not to participate in the government-run Connect for Health Colorado can use private exchanges to provide insurance for their employees.
Four plans are available on the Estes Park School District’s exchange, which went live on May 13. More than 100 employees at the district were eligible to sign up for coverage, said Randy Rush, client executive and vice president at HUB.
Nearly every eligible employee signed up using Bright Choices, Rush said. Bright Choices, produced by New York-based Liazon, is an online software portal that allows employees to determine how much risk they want to accept with their insurance policies, and which policies will offer the best coverage for the best price based on their medical histories.
The Estes Park district is contributing a set amount to every employee’s premium, but choosing plans is left up to the individual employees.
The school district was looking at a 25 percent increase in its premiums for the coming year, said Gerald Gabbard, director of human resources for the district. The school still saw a substantial premium increase as a result of ever-increasing health-care costs, but instead of 25 percent, the increase was 19 percent.
In addition to its premium contribution, the district had to pay $6 per employee to use Bright Choices, but Gabbard called that expense a “good investment.”
Eventually, the school district hopes to get more types of coverage on the exchange, including dental and vision, Gabbard said.
“The private exchange for us was mostly an enrollment tool,” he said, “but it helps employees make better choices for their finances and their lifestyles.”
Private health care exchanges are not a new idea, said Robert Galvin, a medical doctor and chief executive of Equity Healthcare, a New York-based health-care purchasing group. The idea first began circulating in the 1970s, but never caught on.
The advent of the Affordable Care Act caused private exchanges to “come out of nowhere,” Galvin said.
“The private sector wants an alternative to sending employees to the public exchange,” he said. “They may not trust the government, but they like consumerism, they like choice and engagement.”
Private exchanges now are forming very quickly, launched by consultants, brokerages and even insurance companies themselves, Galvin said – and they’re only gathering steam.
Galvin estimated that nationwide, a “couple million” lives are covered via plans purchased on a private exchange, but that number is likely to grow to 25 million to 30 million in the next decade.
Some private exchanges will not survive, he said, but those that provide the best user interface will succeed.
“It’s going to be mostly the same insurers on every exchange,” Galvin said. “The difference will be how easy a particular exchange is to use.”
Galvin’s company is in the process of starting its own exchange, using Bright Choices, the same software used by HUB International for Estes Park School District. Galvin called Bright Choices’ questions gauging comfort with risk the company’s “claim to fame.”
Detractors say private exchanges provide a way for employers to duck the impending employer mandate, under which companies with 50 or more full-time equivalent employees must insure their employees or pay a penalty. In a private exchange employers give employees a voucher for coverage and offer no more support.
Galvin calls that criticism a myth.
“It will smell like a voucher, but employers will stay involved,” he said.
For insurers, private exchanges provide another avenue for reaching potential policyholders.
“We view these markets as offering increased choice, and this capability is another option for our employer clients to choose from to achieve their benefits strategy,” said Michelle Vroom, spokeswoman for insurance giant Cigna (NYSE: CI).
To that end, Cigna in February launched its own exchange, which will be available to companies in Denver in July. It offers its plans on a variety of other private exchanges as well.
Molly Armbrister can be reached at 970-232-3129, 303-630-1969 or firstname.lastname@example.org. Follow her on Twitter at @marmbristerBW.