Shots - Health News
12:20 am
Wed November 27, 2013

To Changing Landscape, Add Private Health Care Exchanges

Originally published on Wed March 11, 2015 1:04 pm

We've been reporting a lot lately on the troubled rollout of President Obama's signature health care law. But at the same time, there are rumblings of a major shift in the way companies offer private health insurance to workers.

It involves what are called "private health care exchanges." These are similar to — but completely separate from — the public exchanges you've heard so much about.

Some experts say this new approach soon could change how millions of Americans receive their health care.

Dean Carter is the chief human resources officer for Sears Holdings, which means he has shifted more than 50,000 employees onto this new kind of health care system. And he thinks this is the future. "In my 20 years of HR and working with benefits," Dean says, "this fundamentally changes the game."

The change Dean is talking about is kind of like what happened when most companies stopped offering pensions. Instead, many just contribute money to their workers' retirement accounts.

With health care now, some companies are saying: "Here's $300 to $400 a paycheck. Go use that toward buying insurance on a 'private exchange.' "

For years, at big conferences attended by benefits managers, there has been talk about private health care exchanges, with four, five or six different carriers competing on price to offer people insurance. But it seemed to be something maybe 10 years in the future. Then the Affordable Care Act passed. And that made exchanges seem more doable right away for the private sector, too.

"When we began to look at it, and it looked like it was a good idea for our associates and Sears Holdings, we leaned in fast," says Carter.

In the past, the whole company was essentially trapped in a health plan for several years with one insurance company, says Carter: "For two to three years, the entire employee population would be locked in to using that carrier alone. ... If that carrier decided there would be cost increases year on year, you were basically loaded into those cost increases."

But in private health care exchanges, every year multiple insurance companies have to compete on the exchange. And individual employees shop for the various plans, and select an insurance company based on the price they offer for benefits.

"We believe the competitive nature enables us to save on costs and our employees to save on costs," says Carter.

Akshay Kapur, a principal with the consulting firm Booz & Co., studies health care and private exchanges. And he says these exchanges reduce costs, both through competition and by changing employee behavior. "Once you give a fixed amount of money to employees, they will make health care choices that are appropriate or optimal for themselves and their family," says Kapur.

Kapur says that will mean fewer healthy people going to the doctor too frequently. For example, some plans have premiums as low as $5 a paycheck but with a $6,000 deductible. That might be a good option for someone who is healthy and doesn't expect to go to the doctor. Most plans, though, also offer some free checkups, to make sure people are going to the doctor enough to catch any health problems early on.

In theory, these new private exchanges might sound good. But, there are problems.

Christine Trapp, 42, has been battling advanced-stage breast cancer. She also works for a major retailer that's switching to a private exchange, which she says has been having the same kind of problems as the public exchanges. The website wouldn't work, and she couldn't get help on the phone, Trapp says, calling it "very overwhelming and confusing."

And, she says, "contacting the company to get answers was very difficult — 20-, 30-, 40-minute wait times."

As it turned out, her employer is chipping in $417 per paycheck. And with that, she could have gotten a similar plan to the one she had before for a few dollars less per paycheck. But she couldn't figure that out. So she signed up for the most expensive platinum plan because she was scared about losing her doctors and fouling up her cancer treatment. That's going to mean a 25 percent cut in her take-home pay. She makes $37,000 a year and has two kids in college. So for now, Trapp says, she's going to try to save money however she can.

Going forward, as more companies make this shift, will competition rein in rising health care costs for workers? Or will workers end up paying more anyway, because employers keep making them shoulder more of the health care burden?

Copyright 2015 NPR. To see more, visit http://www.npr.org/.

Transcript

DAVID GREENE, HOST:

This is MORNING EDITION, from NPR News. Good morning. I'm David Greene.

LINDA WERTHEIMER, HOST:

And I'm Linda Wertheimer. We've been reporting on the troubled rollout of Obamacare's insurance exchanges. Now, let's hear how it's going for the completely separate, private industry health care exchanges. For the millions of people who have insurance through their jobs, this could represent a huge shift in how they get their health care.

NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: Dean Carter is the chief human resources officer for Sears Holdings, which means he's got more than 50,000 employees who he's shifted out of this new kind of health care system. And he thinks this is the future.

DEAN CARTER: In my 20 years of HR and working with benefits, this fundamentally changes the game.

ARNOLD: The change is kind of like what happened when most companies stopped offering pensions. Instead, many just contribute money to their workers' retirement accounts. And with health care, some companies are now saying, here's 3- or $400 a paycheck. Go use that towards buying insurance on a private exchange.

That had been talked about for years. Then, when the Affordable Care Act passed, that made exchanges seem more doable not just for the public sector but the private sector, too. Dean Carter.

CARTER: When we began to look at it, and it looked like it was a good idea for our associates and for Sears Holdings, we leaned in fast.

ARNOLD: Carter says in the past, the whole company was essentially trapped in a health care plan for several years with one insurance company.

CARTER: For two to three years, the entire employee population would be locked into using that carrier alone. And if that carrier decided there will be cost increases year on year, you were basically loaded into those cost increases.

ARNOLD: But now, every year, multiple insurance companies will have to compete on the exchange based on cost, to get each individual employee to choose them and sign up.

AKSHAY KAPUR: We believe that the competitive nature enables us to save costs, and enables employees to save costs.

ARNOLD: Akshay Kapur is a principal with the consulting firm Booz and Co. He says exchanges do reduce costs through competition, and also by changing employee behavior.

KAPUR: Once you give a fixed amount of money to employees, they will make health care choices that are appropriate or optimal for themselves and their family.

ARNOLD: In other words, you'll have fewer healthy people overinsured and going to the doctor too much. For example, after the money the employer kicks in, some plans have premiums as low as $5 a paycheck but with a high - $6,000 - deductible. That would be for someone who is healthy and doesn't expect to go to the doctor, though most plans also offer some free checkups.

OK, so in theory, all this might sound good. In practice, there have been some problems.

CHRISTINE TRAPP: I really had a lot of struggles with accessing the system, and navigating the system.

ARNOLD: Christine Trapp is 42 years old. She's been battling advanced-stage breast cancer. And she also works for a major retailer that's switching to a private exchange, which she says has been having the same kind of problems as the public exchanges. The website wouldn't work; she couldn't get help on the phone.

TRAPP: Very overwhelming, very confusing; contacting the company to try and get answers was very difficult - 20-, 30-, 40-minute wait times.

ARNOLD: She says it turned out her employer is chipping in $417 per paycheck. And with that, she could have gotten a similar plan as she had before, for about the same cost. But she couldn't figure that out. So she signed up for the most expensive platinum plan because she was just scared about losing her doctors, and fouling up her cancer treatment. That's going to mean a 25 percent cut in her take-home pay. She makes $37,000 a year; has two kids in college right now. So for now, she's just going to try to save money however she can.

TRAPP: The groceries and paying medical bills and paying credit cards, that is probably going to have to be reduced.

ARNOLD: Going forward on these health care exchanges, one big question is this: As more companies make this shift, will competition help rein in rising health care costs for workers; or will workers end up paying more anyway because employers keep making them shoulder more of the health care burden?

Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.