Sam Gibbs is president of eHealth Government Solutions, part of California-based eHealthInsurance Services Inc. The company, founded in 1997, pioneered the sale of health insurance over the Internet. It now facilitates sales of health insurance products from more than 180 companies—for individuals and small businesses—in all 50 states. Gibbs spoke about the options for health insurance exchanges, including the state-based exchanges mandated by the Patient Protection and Affordable Care Act, as well as private exchanges, such as eHealth’s and one being developed by Minnesota-based Bloom Health and Indianapolis-based WellPoint Inc.
IBJ: What are the models that the state-based insurance exchanges could take?
A: California has a Medicaid enrollment process. So their vision of an exchange is sort of an expansion of a Medicaid enrollment process. But it’s mostly a big help center approach. That’s the one that’s the most people-centric. To contrast with that, there’s a couple of states, Pennsylvania and Virginia, they don’t want to be in the public-facing part of it at all. What they’re going to do is, they’re going to empower or sanction private companies to be the front-end exchange. They’ve recognized that states have never been in the e-commerce business. So they’re just going to outsource that to the private sector. Then most of the states—and Indiana is in this group—[say] they’ll create a separate not-for-profit and then bid it out to private companies.
IBJ: Do you expect private exchanges to be embraced by employers?
A: Small businesses, what’s happened over the past decade is that they’ve been priced out of it. So they’re constantly having to scale back benefits and trying to be creative. In fact, a lot of employers have dropped coverage over the last five years. The advantage of the [private] shop exchange is that it allows them to switch from a defined benefit to a defined contribution plan. It gives the employer absolute control over what they’re spending. And it allows the employee to actually pick the plan they want—based on where employees are in their life cycle. And they get to take it with them if they change companies. It’s a pretty big change. But my gut tells me it’s what the market wants.
IBJ: Since the defined contribution concept puts a lot more risk on employees, do you expect any employee pushback as employers switch to this model?
A: It’s so hard to say. If you understand the marketplace pretty well, you can get pretty excited about it. So I don’t know. If I just had to guess right now, I would suspect initially there’d be some resistance to it.