(Bloomberg) — Automatic Data Processing Inc. (NYSE:ADP), the payroll-processing giant, will offer companies a new way for their employees to select health benefits, challenging firms like Towers Watson & Co. (NYSE:TW) and Marsh & McLennan Cos. (NYSE:MMC).
ADP is introducing an online service known as a private insurance exchange that will let workers shop for coverage among multiple health plans, much the same way consumers can select policies on a government-run exchange under the Patient Protection and Affordable Care Act (PPACA), or Obamacare.
A new defined contribution, payroll-deduction payment feature could help employers limit costs: Employees can be given a fixed sum of money to spend on the plan they pick, with any premium amounts over that limit coming out of each paycheck.
See also: How PPACA has already affected employers
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Exchanges have caught on in recent years as a way for employers to give employees more choices of coverage and potentially shift more of the cost to them as well. About 40 million people will pick a health plan for 2018 through an online exchange, up from 6 million for this year, according to Accenture PLC.
“More people are going to need this high-grade shopping experience, they’re going to want more information, and they’re going to want to take more control over their health care,” Gerry Leonard, president of ADP Benefits Services, said in an interview.
ADP, which handles health benefits for about 15 million people, has been expanding its offerings as companies work to comply with PPACA.
ADP’s website works with its other offerings that help employers manage payroll and benefits. That could help it compete with exchanges offered by firms like Aon PLC (NYSE:AON), Towers Watson and Marsh & McLennan’s Mercer. Willis Group Holdings PLC (NYSE:WSH) said in June that it would merge with Towers Watson, in part to expand in employee benefits such as insurance exchanges.
USI Insurance Services will help companies pick health plans to offer on ADP’s exchange, though employers also can use their own broker instead.