Health-Care Deal Could Open Door to More Options
Insurers WellPoint, Health Care Service, and Blue Cross Blue Shield of Michigan bought an ownership stake in private health-care exchange Bloom Health this week, marking one of the first big moves by traditional insurers into the types of exchanges that could be used under the Obama Administration’s health-care overhaul. Leveraging the Bloom Health acquisition, WellPoint and the other insurers plan to offer exchanges on a limited basis in 2012, and become fully operational by 2013.
While the new law will require U.S. states to run their own exchanges, a corporate exchange could be a middle ground between keeping a group plan and leaving employees to use the state exchanges. Regulations that would affect corporate exchanges are still being written, so most companies will probably want to wait for the new laws to take effect in 2014 before deciding whether to use them.
According to Bryce Williams, CEO of health-care exchange operator Extend Health, such corporate exchanges could offer companies an alternative to buying group plans from a health insurer. According to Williams, it could look something like this:
To use an exchange system, employers would cancel their group plan and pay the government penalty (around $2,000 to $3,000 per employee); Employers then set up and fund contributions to a Health Reimbursement Arrangement for each individual employee; They would then direct employees to a health-care exchange where they could use those funds; Employees, with the help of benefits advisors, could shop for their own full insurance plan on the exchange.
“It would be the same overall shift from defined benefit plans to defined contribution plans as in pensions,” Williams said, as some of the responsibility for health-care choices would be shifted to employees.
Health-care exchanges are now mostly used for corporate retirees at companies including Ford, Chrysler and Caterpillar, so that they can supplement their Medicare. Companies that use them have seen their retiree health plan costs come down as insurers have to compete against each other to attract retirees on the exchanges, Williams said. Ford, for example, estimates it saves $80 million a year by using the exchange, and reduces health-care liabilities on its balance sheet.
Nationally, the average cost of providing employee health insurance plans was $9,562 in 2010 according to Mercer, so even with the penalties, the upcoming exchanges may reduce costs for some companies.
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