Private Health Insurance Exchange Enrollment Doubled from 2014 to 2015
By Richard Birhanzel, Scott Brown, Joshua Tauber
Accenture, April 3, 2015
An estimated 6 million1 members enrolled in their benefits on a private health insurance exchange for the 2015 plan year, continuing a remarkable adoption trend in excess of 100 percent annual growth since 2013.
The mid-size employer segment of 100 to 2,500 employees is driving initial growth, as evidenced by the expansion of the consultant-led exchanges servicing this market.
Accenture forecasts enrollment of employees under 65 years old and dependents will grow to 12 million in 2016 and 22 million in 2017.
Accenture projects growth will remain on track to reach 40 million enrollees by 2018.
Two Early Growth Limiters Will Dissipate
Two key factors limiting private health insurance exchange growth in the initial years will dissolve in the near term: capacity constraints by a lack of mature solution providers and adoption delays among large employers.
Accelerators Are Emerging To Further Catalyze Growth
- Increasing administrative requirements: Employers face increasing administrative requirements each year under the Patient Protection & Affordable Care Act (PPACA), such as new minimum essential coverage reports due to the IRS (section 6055). These requirements add to an already substantial compliance workload (e.g., ERISA, HIPAA, COBRA). Private health insurance exchanges can significantly reduce these requirements with robust reporting and compliance services.
- Employer Mandate: The Employer Shared Responsibility Provision, more popularly known as the Employer Mandate, will compel employers to revisit their benefits strategy. Coupled with lower than expected SHOP enrollment, smaller firms in particular may increasingly consider the merits of private exchanges to deliver a simpler path to comprehensive coverage in a compliant fashion.
- Employers maintaining coverage: Many employers have not dropped coverage altogether, as some initially forecasted. In fact, most employees view health insurance as a critical employer-provided benefit, limiting some employers’ ability to drop or defund health coverage. Accenture’s 2015 Private Health Insurance Exchange Consumer Research shows that 76 percent of consumers see health insurance as the primary or an important factor for continuing to work at their current employer. As employers seek a compelling alternative, the private exchange model of reducing costs and administrative burden emerges as a clear favorite.
- Cadillac Tax: Finally, the 40 percent excise tax on high-cost plans, often termed the Cadillac Tax, will go into effect in 2018. This could affect as many as 38 percent of large employers and 17 percent of all American businesses3 if insufficient action is taken. Private health insurance exchanges will provide an ideal alternative to simultaneously migrate away from these legacy high-cost plans, and provide employees with new options to manage their health. Accenture expects private exchange enrollment to spike in 2017 as employers look to avoid these looming penalties.
Latent Demand Will Ensure Growth
Consumers’ latent demand for choice and flexibility in a retail-like shopping environment, paired with notable early successes, are increasingly overwhelming capacity constraints and employer inhibitions. Employers’ drive to meet consumer expectations, spurred on by key accelerators, will lead to 40 million members on private exchanges by 2018.
By Don McCanne, MD
Employers have discovered that they can relieve themselves of much of the burden and costs of administering their employee health benefit programs, while using defined contributions to shift more costs to their employees, simply by referring them to private insurance exchanges. This is really catching on now with over 100 percent annual growth in the past three years, and an anticipated enrollment of 40 million by 2018.
These are not the insurance exchanges established by the Affordable Care Act, but they are private programs established by insurers and other industry consulting organizations. As more costs are passed on to the employees, the adequacy of the plans will certainly deteriorate further. Most employees will find that their increasing contribution requirements for the insurance premiums plus their out-of-pocket costs will become less and less affordable.
We continue to hear from politicians and the policy community that we do not need comprehensive reform such as the single payer model since the implementation of the Affordable Care Act is working so well with large numbers of new enrollments in the various sectors of health care coverage. What is being ignored is that the insurance products are deteriorating rapidly, especially with the very large increases in deductibles and the further narrowing of networks of health care providers. That some lower-income individuals are receiving subsidies (often inadequate) will provide little solace for the majority who find that their costs are becoming ever less manageable.
This explosion in the growth of private insurance exchanges further advances the ideology of those who wish to place patients in charge of their own spending by making them bear an ever increasing share of health care costs. This shift from solidarity to individual responsibility will be devastating for individuals with future health care needs. And now the venerated employer-sponsored coverage is becoming a major part of the problem.
Changing to a single payer national health program would remove control of health care financing from external players such as employers and place it in our hands through our own elected public stewards. The three trillion dollars that we are already spending is more than enough to provide quality care for everyone. We just have to make sure it is being spent on patients rather than on a glut of administrators and insurers who are eroding the protection provided by private insurance.