In a World of Private Exchanges, Will Employers Matter?

By Laurel Pickering (NEBGH)

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“Whoever has the gold makes the rules.”

The only way the healthcare industry will change is if the people that pay the bills tell it to change.” - Craig Barrett, Former Chairman and CEO, Intel Corporation

Employers pay the bills for roughly half of U.S. total healthcare spending.  That gives them leverage – when they choose to use it – to drive change and value in the healthcare system. 

But what happens if more employers turn to private exchanges, leaving employees with decisions about which health plan to choose?  What will happen to employer leverage?  Or – to put it bluntly – in a private exchange scenario, does the employer matter?

Healthcare-focused business coalitions were created to consolidate and focus employers’ leverage with health plans and other service providers they contract with.  Examples of the kind of leverage employers can exert include:

  • Convincing major health plans to work together to figure out how to reimburse providers for better depression treatment, a project currently underway by the Northeast Business Group on Health;
  • Pressuring all hospitals in one state to complete the Leapfrog Hospital Survey by increasing  deductibles for hospitals that didn’t fill it out, an initiative by the State of Maine’s Division of Employee Health and Benefits;  
  • Influencing health plans to develop transparency tools to help employees make better decisions and get more from their healthcare dollars as they pick up a greater percentage of costs; 
  • Lobbying health plans to administer value-based plan design because it increases compliance with prevention and treatment;
  • Offering employees the ability to get higher quality, more efficient care in another country, causing local providers to improve their outcomes and decrease cost.

In a private exchange scenario, plans may compete for employee market share, and in theory, this competition should create better products at lower prices.  But where will market influence come from?   Who will pressure plans to act outside of their financial self- interest in the name of value, quality and better health?  Who will keep their collective feet to the fire?

So far, the exchanges are choosing plans they’ll work with based on price, with little attention to performance or other factors.  Will that change?  Will private exchanges become a force for better healthcare quality and value? 

Employers will still “hold the gold”.  Will they now have to influence exchanges, too?

Stay tuned.