Mercer, the New York-based health benefits broker, has started offering a new health insurance exchange as a way for employers to offer more choices and potentially lower costs to their workers.
The Mercer Marketplace will offer health coverage from four companies—Aetna Inc., Cigna Corp., UnitedHealthcare and Anthem Blue Cross and Blue Shield.
Indianapolis-based Anthem also started its own health insurance marketplaces this year in Indiana and eight other states. Anthem expects the exchanges to serve employers covering about 30,000 people.
The exchange concept is a centerpiece of President Obama’s 2010 health reform law, especially as a way for individuals to buy health coverage with federal subsidies. However, most Indiana employers are shying away from the public exchanges and instead eyeing private exchanges run by individual health insurers or by brokers like Mercer and Aon Hewitt.
Employer interest appears to be particularly high in Indiana. In a 2012 survey of employers by Mercer, 41 percent of Indiana companies with 500 workers or more said they would use a private exchange to offer health benefits.
Nationally, 29 percent of employers with more than 500 workers said they would consider a private exchange. And interest was even higher among smaller employers.
“We’re definitely seeing an interest,” said Andrew Rosenberg, the leader of Mercer’s health and benefits practice in Indianapolis. He said he has had six meetings with employers in the past two weeks, although no employer has committed to use the exchange to offer health benefits in 2014.
Mercer’s exchange will offer five standardized health plans from each of the four companies. The exchange will accept only employers with 100 or more workers.
The main selling point for the private exchanges is that they could help employers control and possibly even reduce costs for health benefits.
Employers that use a private exchange would contribute money into an account on the exchange for each worker—more for those seeking family coverage and less for those seeking single coverage. This is called “defined contribution” health benefits, as opposed to the “defined benefit" that most employers now purchase for their workers.
Using a defined contribution strategy, employers could then increase that contribution by a set amount each year—effectively shifting the risk of fast-rising health insurance premiums onto workers.
In a presentation Rosenberg makes to employers, a fictional company paying an average of $7,800 for health benefits for each of its 1,000 workers could save $5 million over five years by increasing its defined contributions just 3 percent per year—as opposed to a more typical 7-percent increase that many employers have experienced in the recent past.
“Really, cost is what gets people’s attention,” Rosenberg said. He added that Mercer Marketplace hopes to achieve savings for employers by aggregating their buying power with health insurers.
Whether the defined contribution approach goes down well with workers remains to be seen. One reason it might, Rosenberg noted, is that the private exchange gives workers more insurance policies to choose from—which may help them avoid paying for unneeded coverage.
For example, a single worker without a spouse and with no plans to have children could choose a policy that does not offer maternity coverage, thus reducing his or her premiums. Right now, maternity coverage is fairly standard in employer-sponsored health plans.
“We know that most employees are over-insured and that they would select less-rich benefits, given the option,” Rosenberg said.
Also, Indianapolis-area hospital systems are now forming “narrow networks” that will offer cheaper premiums if a worker and his or her dependents seek care only from that one hospital system.
Rosenberg noted that Mercer Marketplace will handle the enrollment for all kinds of insurance an employer may offer to its workers. This could include not only health benefits, but also dental, vision, life, accident, auto, home, critical illness and even pet insurance.
Mercer Marketplace will charge an administration fee, and Mercer will still earn money through employer fees or through commissions from insurers, which are passed on to employers as part of their premiums.
“This is not the end-all of benefits, Rosenberg said. “It’s an option. It’s an option we think can help reduce costs, simplify administration.”