How Insurance Sellers Are Approaching Private Exchanges

By Cyril Tuohy

InsuranceNewsNet

Sellers of health insurance plans are joining private health care exchanges where they can offer group buyers the most local expertise and “density,” said Joe Swedish, chief executive officer of health insurer WellPoint.

WellPoint is one of the first large health insurers to report second quarter earnings. Swedish’s comments offer a glimpse of how health insurance carriers are approaching private exchange marketplaces popping up around the country.

Private exchanges are cropping up as an alternative to the federal and state-based exchanges that are expected to go live on Jan. 1, following the three-month enrollment period which begins Oct. 1.

Swedish also said WellPoint had filed documentation to participate in 140 separate markets, and that WellPoint expects to “participate selectively in smaller group exchanges.”

“Peers are taking a similar stance,” he said during a conference call with investors and analysts.

Second quarter net income jumped 24 percent to $800.1 million, or $2.64 per share, in the three months that ended June 30. This is up from $643.6 million, or $1.94 per share, in the same period last year, WellPoint also reported.

Swedish said the company was “well-positioned for growth opportunities” next year. He noted the improving growth trends in offering health coverage in the local group market and in the self-insured market.

Many larger companies that are big buyers of health insurance coverage continue to prefer the traditional preferred provider organization (PPO) health plans that they have offered employees over the past several years, Swedish said. Right now, it appears the big buyers – Fortune 1000 companies, for example – are taking more of a wait-and-see approach with regard to the private exchanges.

Private exchanges, he said, are among the options employers are looking at to keep rate increases as low as possible.

Fully-insured employer-based coverage “will likely see membership declines in 2014,” as employees decide to shop for coverage in public state and federal exchanges, Swedish said. Buyer migration to the exchanges also is likely to be slower than what WellPoint had modeled six months ago as employers and individuals assess joining an exchange, he said.

Big health benefits intermediaries such as Aon and Mercer, along with third-party providers with expertise in operating an exchange, have set up private exchanges so that buyers can shop around for competitive group plans offered by sellers like WellPoint.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at Cyril.Tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.