Private exchanges key to industry reform


Private health insurance exchanges, which now cover more than 1.5 million people, hold the power to transform the health insurance industry because of their potential to boost competition and innovation among insurers.

Exchanges operated by private companies could "set in motion a process that will firmly establish managed competition as the predominant way of buying and selling health insurance and open the market to innovative high-value systems," Alain Enthoven, a Stanford University professor, wrote in a Health Affairs blog post.

Private exchanges allow individuals to choose health coverage based on their specific situations, which could lead to heightened innovation among insurers trying to recruit more members. In fact, Aon Hewitt, which operates a private exchange, found 58 percent of employees chose a plan providing different coverage than what they had with their employer-based plan, FierceHealthPayer previously reported.

If these private exchanges expand beyond the big national insurers to include regional integrated delivery systems--such as Salt Lake City-based Intermountain Healthcare or Geisinger Health System in Pennsylvania--that offer their own plans, employers and individuals will find the exchanges more attractive.

These integrated systems could market their superior efficiency through lower premiums, which likely would cause larger, nationwide insurers to develop policies that include systems without their own affiliated insurance arm.

If private exchanges outpace their public counterparts in the next few years like some reports have predicted, almost 40 million people will buy health coverage from a private exchange by 2018, which could significantly impact the overall insurance industry.

To learn more:
- read the Health Affairs blog post

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