Public HIX Give Commercial Plans a Run for Their Money

The new public health insurance exchanges are a good deal when compared to plans that private employers offer, PwC research shows. But don't expect employers to push workers toward the public exchanges yet.

Public health insurance exchanges are in their infancy, but they are growing into a potential game changer in the U.S. health insurance market.

In a recent study conducted by the Health Research Institute at PricewaterhouseCoopers, the costs to policy holders for health plans offered on the public exchanges were found to be comparable to or lower than plans offered through private employers. "For the first-year results, we were surprised to see these [public exchanges] were right in there with what employers were offering," said Mike Thompson, principal at PwC's global human resources services practice.

Ceci Connolly, managing director of PwC's Health Research Institute, says the study is significant because it is the first to take an objective look at the numbers in the new public exchanges as opposed to comparing the new health plans to the historical individual insurance market. "The exchanges are competitive with plans serving the 156 million people in the employer-sponsored market," she told me. "That's a very important benchmark to look at."

The Health Research Institute is the research arm of PwC's practice. It does not conduct studies for hire.

See Also: Private HIX Pose Challenge to Public Health Insurance Exchanges

PwC's research pegged the employer "active single" rate at $6,119, with the comparable public exchange median rate 4 percent lower at $5,844. The lowest public exchange rate for a similar individual was 20 percent lower at $4,885.

Connolly said she and her colleagues had assumed the public exchange rates would be higher based on "the early chatter—early rhetoric that the exchanges were really expensive."

Two experts in the health insurance field find the PwC results more refreshing than surprising.

"The market was moving toward cost-control strategies" before implementation of the federal Affordable Care Act, said Alex Feldvebel, deputy commissioner of the N.H. Insurance Department. "The carriers were looking for ways to limit costs increases to consumers… You have the phenomenon that the market is reaching an affordability barrier."

Prior to the PPACA, insurers used "risk selection tools" to avoid insuring individuals who would file the most claims such as people with pre-existing conditions, he said. With a decreased ability for insurers to limit costs, "they are aware that they are going to compete more on price," Feldvebel said, adding the PPACA has "cleared the way to more aggressive negotiations with providers."

Linda Tiano, who works in the healthcare and life sciences practice of the Washington, DC-based law firm Epstein Becker Green, said the PwC study confirms an undeniable truth. "They're all trends that would have happened anyway," she said of the relatively low cost to policy holders in the public exchanges. "Premiums are so high, we as a society have to find ways to reduce them."

According to a December 2013 "issue brief" from America's Health Insurance Plans, insurers believe so-called narrow networks are a key factor driving down policy costs in the public exchanges: "To help preserve affordability and high value health care for consumers and employers, health plans are turning to high-performance provider networks designed to reward quality and effectiveness."

One of the more intriguing implications of the PwC research is the possibility that employers may start urging their workers to seek health insurance on the public exchanges.

Feldvebel said the Massachusetts healthcare reform experience indicates employers may be reluctant to push their workers into the public exchange market. "The impact is less than you would think," he said of recent studies on the impact of the public exchange in the Bay State. "Employers continue to offer coverage as they have in the past."

Tiano was equally skeptical. "Employers are going to want to continue to have benefits that make them attractive to [potential workers]," she said. But the healthcare legal expert said employers are watching the public exchanges closely to see whether they can adopt innovations to boost their bottom lines.

"You may see employers moving to private exchanges," Tiano said. "They're similar [to the public exchanges] in that smaller employers can make more offerings to their workers."

While Feldvebel and Tiano are reluctant to view the public exchanges as a revolutionary development for the broader health insurance market, that's not necessarily the view in Texas, where everything is big, including the impact of the federally administered health insurance exchange.

"We are already seeing employers do away with small group health plans and having us come in to assist their employees with exchange plans," said Tanya Boyd, an insurance broker and owner of Tanya Boyd & Associates in Sunnyvale, TX. "Some get tax credits and some don't. For those with tax credits and dependents, it has so far been a substantial savings to both the employee and the employer."

At the very least, the public exchange market is giving Texas employers a valuable option, Boyd told me.

"Not all employers like dealing with the administrative burdens of group health plans, and this allows them to wash their hands of it, and in turn makes it more affordable for some employees depending on their income and household size," she said.

There's no crystal ball providing a clear view of the future for the public exchanges and the broader healthcare insurance market. But the view does get sharper when we can rely more on objective analysis and less on "early rhetoric."