Rise of Retail Health Exchanges Could Heavily Impact Insurance Industry

Retail health insurance marketplaces, also known as exchanges, are on the cusp of dramatically changing the health insurance business, according to a new report from PwC’s Health Research Institute (HRI).

The report The Rise of Retail Health Coverage revealed health exchanges will experience significant growth during the next decade as employers move away from the benefit business and push individual consumers to take on new responsibility for their own insurance.

"Employers are expressing significant interest in private exchanges, but taking the time to evaluate the various exchange offerings," Barbara Gniewek, principal, PwC's Human Resource Services practice, said in a statement. "We are watching very closely as the market continues to evolve.”

Although health exchanges have existed for years, the Affordable Care Act has broadened awareness of exchanges through the legislation’s own public exchange, as well as the emergence of several private exchanges.

According to the report, 32% of employers are considering moving their employees to a private exchange in the next 3 years. Small and mid-sized companies or those with high turnover where most employees are low-wage, part-time workers that would react neutrally or favorably to the change are more likely to go the route of a health insurance exchange.

However, large companies, particularly those with low turnover, where employee demographics vary, health benefits are considered crucial, and workers would react negatively to the change, are less likely to switch to a health exchange.

There are many implications resulting from the increasing interest in using exchanges, both public and private. Not only will insurers have to consider offering products on these exchanges, but also they will likely want to develop transparency and outreach tools for consumers, according to HRI’s report. In turn, providers should expect growing pressure on price and transparency and consider exploring direct contracting arrangements.

Not all companies will find value in switching to a health exchange, though. Many already control costs through high-deductible health plans (67%) or plans that are compatible with health savings accounts for defined contribution (47%).

“Exchanges that can deliver sustainable cost savings, and enhance the customer experience while reducing the administrative burden will be best positioned for success," Gniewek said.