Private health exchanges: Coming to your employer? 

Private health insurance exchanges are the latest option employees may face when trying to figure out their employer health care coverage. Private exchanges, which have been slowly building for about five years, use the same model as the public Affordable Care Act exchanges -- offering consumers a menu of health care plans from a variety of insurance carriers.

Usually these exchanges are designed by big benefits consulting firms such as Aon and Mercer. In many cases, employers give employees a defined contribution and let them spend those dollars on the exchange however they see fit. Some private exchanges also sell additional insurance products including dental, vision, life, disability and ID theft protection, said Eric Grossman, senior partner Mercer.

Starbucks (SBUX) is the latest big name to join the private exchange trend. When the company announced it would offer employees up to five levels of coverage from up to six national and regional insurance carriers throughout the country using Aon's exchange, it gave a much-needed boost to the trend.

California leads the pack in private health insurance signups

Although the number of employers adopting private exchanges jumped 35 percent in the 2016 plan year (on top of a 100 percent jump in 2015) only 3 percent of all U.S. employers use an exchange. Employers may be slow to jump on the bandwagon because they don't know about this new structure, or they may not be convinced it will lower costs.

Along with Starbuck's, Darden Restaurants (DRI) and Sears (SHLD) have been other major-company early adopters. Scott Brown, managing director of payer consulting at Accenture Consulting (ACN) expects more big names to join the trend and overall growth to be in the 20 percent to 25 percent range in the next couple of years.

Employers may start to see that exchanges can offer more choices to employees while lowering health care costs through the increased competition an exchange provides, he said.

So what should you look out for if your employer offers an exchange during the coming open-enrollment season?

More choices. Because most private exchanges are set up by benefit consulting firms that negotiate with insurance companies of all sizes in all regions of the country, employers that pay for these programs are able to offer far more choices than they can on their own.

In general, more choice is a good thing, but it means you'll need to do more comparison shopping than you may have done in the past when your employer offered only two or three options.

Affordable Care Act not so affordable

The exchanges run by Aon, for instance, include between three to five network options in each of four levels of coverage. Like the public exchanges, AON uses metallic designations to describe coverage levels, with platinum being the most comprehensive and usually most expensive. Lower-cost gold and silver plans are also available as well as bronze plans, which have the lowest premiums but also the highest deductibles.

You'll have to determine how much insurance coverage you need based on how healthy you are, if you have a family -- and how much you can afford.

One thing that may make shopping easier: On many private exchanges insurance plans are standardized on each level. "So if you pick bronze, for instance, you'll get the same covered services, deductibles and co-insurance in each of our bronze plans," John Zern, Aon's CEO of global health explained. "You don't have to figure out the nuances of what the Aetna plan offers or what UnitedHealth is covering," he added.

That said, premiums and provider networks do differ among plans.

Networks that include your doctors. You'll need to take a close look at the doctors in each plan you're considering. In the process, you may find the plan that includes your primary care physician and other doctors you go to regularly costs a few dollars a month more than the other choices in a particular level.

You'll need to decide if you want to save the most money possible and switch provider networks, or determine that paying extra to keep your doctors is worth it to you. Changing doctors, especially if you have an ongoing health condition, can be stressful.

Be sure to check the network of providers each plan offers carefully.

A push toward high-deductible plans. It's not necessarily overt but by offering plenty of high-deductible, low-premium choices the exchanges may be increasing the flow toward plans with high out-of-pocket costs. Research shows that when individuals are offered more choices, 25 percent will choose a low-cost, high-deductible plan, said Accenture's Brown.

Accenture expects that exchanges will cause out-of-pocket collections from patients with employer-sponsored plans to increase by 7 percent by 2018.

A high deductible isn't necessarily a bad thing if you're healthy and don't use a lot of health care services. (Preventive care such as your annual physical is 100 percent-covered by insurance by law.) But you do want to know what you're getting into. Your monthly premium cost may sound great, but make sure you can afford the potential out-of-pocket costs as well.

Free help. Most exchanges come with online tools and customer service lines to help you wade through the choices. Some have tools that tell you what type of plan people in similar situations as yours have chosen.

Be sure to take full advantage of these services. They can help shortcut your search and make the most of the plan you do choose.

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