Private benefit exchanges and the Affordable Care Act (ACA) are tied together in several ways. Most obviously, the ACA introduced the concept of the public health exchange. But it also created new challenges for employer health plan sponsors that called for new solutions. It added serious administrative complexity, as employers were required to comply with new tracking and reporting requirements. It added cost by imposing new standards for plan value and coverages. At the same time, it greatly increased the need for employers to reduce cost by creating a future 40% excise tax on high-cost plans. For the many employers that see their benefit program as a key tool to attract and retain talent, this has meant rethinking fundamental strategies.
Our private benefit exchange, Mercer Marketplace™, was designed to let employers take advantage of group purchasing power and marketplace competition while retaining the flexibility to offer a benefit package tailored to the needs of the organization and the workforce. Without adding to their administrative burden, employers can offer multiple health plans with a range of values, allowing employees to choose just the level of coverage they need. Most Mercer Marketplace employers offer at least three options, and almost a quarter offer five.
As we’ve seen in our first two years of operation, employees tend to buy down, suggesting that overinsurance has been a factor needlessly inflating cost for both employer and employee. Nearly 60% of our clients’ employees selected a high-deductible plan for 2015. Offering an array of voluntary coverages helps employees fill any gaps in coverage and makes it easy to direct the money they’ve saved on medical coverage to pay for other insurance needs. In Mercer Marketplace, employers have the option to set defined benefit or defined contributions and choose between insured and self-funded medical. We continue to innovate to ensure that Mercer Marketplace clients sustain a long-term cost advantage.
The most recent data from Mercer Marketplace tells us we got it right. Employers moving to Mercer Marketplace for the first time typically see immediate cost savings of up to 15%. Our clients are seeing sustained savings in year two as well. The total average cost increase for Marketplace clients with January 2015 renewals was just 1.5% with no plan design changes, compared to the national increase of 4.9% after plan design changes (approximately 7% before design changes) projected by employers in Mercer’s most recent National Survey of Employer-Sponsored Health Plans.
The ACA may have been the initial catalyst for private exchanges, but they in turn have become a catalyst for change and innovation in employer benefits. The phenomenal growth we’ve seen in Mercer Marketplace in 2015 — with enrollment increasing five-fold in just one year — shows that employers are more than ready for what we’re offering: an easier way to provide choice, so that consumers can better manage their benefit dollars; superior customer service; and, most importantly, a truly competitive marketplace that drives innovation.