Health Benefits 2 or More Plans Are Better Than 1

Your new employee is 26 years old. He’s rarely sick -- maybe some occasional weekend-warrior soreness. His biggest health expense is his refrigerator full of grape Mountain Dew Kickstarts.

Then, there’s your vice president. She’s 55 and takes insulin for diabetes, just quit smoking, and has a husband and kids who rely on her insurance. She’s working hard to improve her health.

Obviously, these two have different health insurance needs. But many small and mid-sized employers would be challenged to offer more than one medical plan. In fact, about half of employers with 50 to 499 employees only offer one plan. How can they offer health benefits tailored to employees like these two, plus everyone in between?

A Market-based Solution

Private health exchanges are one approach that a small, but growing, number of companies are using. These exchanges cover some 6 million Americans  and offer an array of plans, from traditional broad-network PPOs to high-performance narrow networks, and from plans with first-dollar coverage to HSA-eligible high-deductible plans.

They’re designed to address today's most challenging aspects of benefits delivery, including:

High Health Benefits Costs

Exchanges usually include employees from multiple companies, so they can leverage their volume to lower health premiums for employees, as well as plan costs for companies. Employees are also given more plans to choose from. They have the option to select higher-deductible health plans that lower their premiums,  while lowering costs for employers as well. Converting to a private health exchange has saved companies up to 15% on their medical costs in the first year.

A Potpourri of Employees (the multigenerational workforce)

In the digital age, even small employers can hire staff from coast to coast. Millennials Skype with baby boomers. Generation Xers instant-message with seniors.

And everyone’s bringing different health needs to the table. Despite this, nine out of 10 employees say benefits are just as important as salary, and 63% say benefits are a major factor in choosing where to work.

Exchanges can offer a wide range of options to suit everyone, such as:

  • Traditional health plans with HMOs and PPOs
  • Narrow networks
  • Provider-owned plans
  • Plans for self-insured employers
  • High-deductible health plans


Today, 80% of employees say a choice of health plans is critical to their job satisfaction. Employees are becoming smarter healthcare consumers. They want to shop around for healthcare and health benefits like they would anything else.

Sometimes, giving employees options is the best choice. For employers turning to private health exchanges, that means offering a variety of plans plus benefits counselors who can advise employees of all their options. The employees can select the best solution for themselves and their families. And that’s a solution everyone can live with.

Peter Bingaman
by Peter Bingaman

Partner, Mercer

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