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David Carter   |   September 26, 2013

Five years from now, we may find that the biggest impact of Obamacare will come not from the new health care insurance infrastructure it creates but from how it prompts employers to react.

In fact, employers moving to private exchanges could have a bigger impact on more Americans than the legislation’s much-talked-about public exchanges.

As Jeffrey Young (http://www.huffingtonpost.com/2013/09/23/obamacare-change_n_3975425.html) points out, most Americans don’t have to participate in the public exchanges. These exchanges serve the uninsured and those who buy insurance on their own, who collectively make up less than 20 percent of the population. Many more are insured through their employers or the government.

Amongst employers, private insurance exchanges for employees are attracting significant interest, Paul Howard reported in Forbes (http://www.forbes.com/sites/theapothecary/2013/09/23/obamacare-killing-traditional-employer-insurance/). A recent Accenture survey (http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Are-You-Ready-Private-Health-Insurance-Exchanges-Are-Looming.pdf) found one in four employers are considering moving to a private exchange during the next three to five years, Howard reported. Accenture suggested that more people will be enrolled in private exchanges (40 million) than public exchanges (31 million) by 2018.

The move to private insurance exchanges has already begun. In just the last few weeks, IBM and Time Warner announced plans to move retirees into private exchanges, and Walgreens said it was doing the same for its current employees.

The rise of private exchanges is largely attributable to Obamacare. As Howard noted, discussion of the public exchanges has “undoubtedly accelerated interest” in private exchanges, but companies “are also looking to avoid Obamacare’s ‘Cadillac Tax,’ which is a 40 percent excise tax beginning in 2018 if their plans cost more than a fixed amount — an amount that is set to grow more slowly than medical inflation traditionally has.”

A number of companies have stepped in to offer private exchanges, but these exchanges can vary significantly. During a recent speech at the Workplace Benefits Summit, Tina Provancal of Aon Hewitt (a private exchange provider), said there were a number of components to consider, Employee Benefit Adviser (http://eba.benefitnews.com/news/making-the-case-for-private-exchange-2736343-1.html) reported. In picking a private exchange, employers need to decide how to offer defined contribution to employees, whether to have a single carrier or multiple carriers, whether to include medical coverage alone or to also offer voluntary products, and whether to have fully insured or self-insured plans, she said.

So, amidst the talk and debate over exchanges, it’s important to consider private exchanges in addition to public exchanges. While, for now, less than 20 percent of people are likely to be using an exchange, that percentage should rise significantly in the coming years, and much of that growth should come through private exchanges.

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