Private exchanges have become the next big thing in healthcare, the newest approach to controlling employers’ healthcare costs and maybe even a way of moving healthcare from a defined benefit to a defined contribution. But they are unlikely to control healthcare costs and the only thing they will move us towards is socialized medicine.
An increasing number of employers are having employees use online “private exchanges” to make their annual healthcare plan selections. According to an Accenture study, one in four employers is considering a private exchange and an estimated 30 million employees will select their employer-provided healthcare plan through a private exchange by 2017.
On the surface private exchanges are attractive. Instead of the employer choosing a healthcare plan for its employees, the employer gives each employee a set amount of money to spend on a healthcare plan of the employee’s choosing. The employees then use the online exchange to select plan parameters that best meet their needs. Employees are able to maximize the value they receive from their healthcare allotment. The employer is removed from the healthcare decision process, no longer providing a defined benefit, healthcare, instead just providing a defined financial contribution for the employees to spend as they see best.




