Close Close

Portfolio > Alternative Investments > Private Equity

Private exchanges: Some employers are still interested

Your article was successfully shared with the contacts you provided.

Private exchanges are no longer sizzling hot, but some employers are still interested in hearing more about them.

The International Foundation of Employee Benefit Plans (FEBP) and Pacific Resources Benefits Advisors have shed some light on what benefits buyers are thinking about the programs in two new survey reports.

The IFEBP invited the benefits and human resources professionals in its databases to talk about a wide range of benefits topics, including private exchange programs, and received responses from 441. About 62 percent work at employers with 100 to 1,000 employees.

Pacific Resources, a benefits firm affiliated with Brown & Brown, polled benefits decisionmakers at a mix of employers with fewer than 5,000 employees and more than 5,000 employees. Pacific Resources focused on the participants’ views about private exchange programs.

See also: Ron Goldstein, exchange pioneer: Group vs. individual

The IFEBP and Pacific Resources found that private exchange programs already serve a small but noticeable percentage of employers, and that some employers are evaluating the possibility of trying the concept.

For more details about what the survey teams found, read on.



Analysts at Oliver Wyman and Accenture predicted a few years ago that private exchange programs could soon serve employer plans with about 40 million covered lives, or about one-quarter of all people with group health benefits.

Private exchanges do not seem to be anywhere close to achieving those sorts of numbers. But the IFEBP survey team found that 4.8 percent of the employers participating in their survey now use private exchange programs for active employees.

More — 9.7 percent — are thinking about using private exchange programs.

About 14 percent of the IFEPB survey participants use private exchanges for retirees ages 65 and older, and 14 percent are thinking about adding private exchanges for retirees.

See also: Private exchange makers show more numbers


Pacific Resources 

Many of the Pacific Resources survey participants said their companies have looked into the private exchange idea in the past two years and decided against trying it.

The percentage who said they were not confident private exchanges could be a viable alternative to their current method of covering active employees increased to 58 percent this year, from 44 percent last year.

The percentage who said they were somewhat confident fell to 27 percent, from 35 percent. 

The percentage who said they were very confident fell to none, from 11 percent.

For 85 percent of the employers that considered using a private exchange program and rejected the idea, uncertainty about whether a private exchange would save money was a key concern. Employee disruption was a key concern for 54 percent.

But the participants said their private exchange programs are already serving 2 percent of their active employees, 2 percent of their early retirees and 11 percent of their Medicare-eligible retirees.

About 6.7 percent said they are already looking into the idea of setting up an exchange program for active employees, and 13 percent said they are looking into setting up an exchange program for early retirees.

About 49 percent of the employers said they would want an independent consultant to help them evaluate any prospective exchange program vendors.

See also:

Tech exec: Decision support tools can keep benefits brokers in game

Joe Ellis: Middle market benefits supply looks fine


Have you followed us on Facebook?