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May 11, 2015 at 10:59 AM
Private health insurance exchange programs may be a little closer to pecking their way out of the egg shell.
In recent weeks, health insurance company executives seemed to go out of their way to yawn at the thought of private exchanges when they talked about their first-quarter earnings with securities analysts.
Executives at Cigna Corp. (NYSE:CI), for example, described adoption as “modest” and gave no numbers.
Executives at Anthem Inc. (NYSE:ANTM) described growth in its private exchange enrollment as not substantial. But, at Anthem, the “not substantial” level of private exchange enrollment number increased to 280,000 in the first quarter, from 100,000 a year earlier.
Health savings account (HSA) programs spent years gestating, under several different names, without attracting many sponsors. The private Medicare plan market took years to take root. Even the major medical insurance market had trouble coming to life.
But major medical insurance is now everywhere, many insurers are more interested in Medicare enrollees than in the commercial market, and, in 2014, 24 percent of employers surveyed by United Benefit Advisors (UBA) were offering HSAs.
If the private exchange channel becomes a standard distribution channel, that could have conflicting effects on traditional agents and brokers.
Even today, the same brick-and-mortar producers may be competing with Web brokers (retail health insurance exchanges) for business, using Web-based wholesale markets to conduct business, and running their own independent or “private labeled” insurance sales websites.
For a look at evidence that the private exchange industry may be graduating out of the pilotware phase, read on.
1. Some of the big private exchange builders are giving more actual enrollment numbers.
Even a few years ago, managers of the early private exchange programs tended to focus on talking about what private exchange plan enrollment might be several years in the future.
Analysts often referred to predictions by other analysts, at Oliver Wyman and Accenture, who suggested that private exchanges could handle employer plans covering about 40 million lives within a few years.
Executives at three of the big, publicly traded private exchange builders — Aon Corp. (NYSE:AON); Marsh & McLennan Companies Inc. (NYSE:MMC); and Towers Watson & Co. (NYSE:TW) — talked a little about enrollment forecasts during the recent earnings calls.
John Haley, president of Towers Watson, said, for example, that private exchanges could have a shot at serving about 30 million employees and dependents by 2022, and that his company would like to be serving a quarter of those people.
But the broker executives were also giving more concrete information about the employers and workers already served.
Aon announced in September 2014 that employers with 600,000 active employee plan members used its private exchange system in 2014. The company hasn’t said how many private exchange enrollees it has right now, but it says third-year enrollment activity has been strong enough to show that its exchange program is sustainable.
Gregory Case, Aon’s president, said during the company’s earnings call that the company has been “very, very fortunate in terms of our client wins.”
“The pipeline continues to be very strong,” Case said.
Julio Portalatin, president of Marsh’s Mercer unit, said the Mercer private exchange programs for retirees and active employees now serve employers with a total of about 1 million eligible lives.
The number of employers served has increased to 250, from 67 in 2014, and demand in the midsize employer market has been especially strong, Portalatin said.
Towers Watson said it had about 800,000 enrollees in private exchange plans in June 2014. Haley said during the recent earnings call that the company has added about 300,000 net new enrollees in the past three quarters.
