It seems like yesterday that the concept of a private health insurance exchange was novel: it’s hard to believe that active exchanges have been available from benefits consultancies for three years, and that retiree exchanges are nearly 11 years old.

Here’s a quick update and review of how the private exchange landscape has changed in this short time.

Active exchanges are much younger than retiree exchanges, and have taken the limelight.  Even in this short period of time, there have been consolidations among suppliers, including Towers Watson acquiring Liazon and Aetna acquiring Bswift. Future acquisitions will likely be by insurance companies or benefits brokers/consultants with the targets being pureplay exchange providers or vendors providing exchange technology.

Recent results and surveys from Aon Hewitt and Mercer suggest the staying power behind active exchanges:

• Aon Hewitt was the first to market its fully-insured active exchange for large companies, Aon Active Health Exchange, and secured Darden Restaurants and Sears Holdings in its freshman year. By its sophomore year, Aon Hewitt was supporting 18 active exchange clients and ~350k participants, including its initial two external clients. Year three included a 100% renewal rate among employers as well as insurance companies, with another ~12 new clients added.  Since its inception, Aon Hewitt’s active exchange model has also expanded its coverage options to include 10 voluntary benefits
• Mercer launched its private exchange, Mercer Marketplace, for 2014 enrollment, and in that one year, enrollment increased fivefold. Further, ~60% of employees on Mercer Marketplace selected a high-deductible health plan, which indicates that many employees are over-insured.  Importantly, the number of large employers likely to terminate their plans within five years and send employees to a public exchange is down from 6% to 4%.

Behind these results is the value proposition of private exchanges, with the most important revolving around choice, which is at the core of consumerism.  In addition, active exchanges help organizations control costs.

To date, according to Mercer’s National Survey of Employer-Sponsored Health Plans, around 3% of large market organizations have adopted active exchanges and another 28% or so are considering it.  Examples of recent active exchange contracts include:

• Aon Hewitt and Hilton Worldwide, covering 70k employees in 44 states
• Towers Watson and Starwood Hotels & Resorts Worldwide, covering 26.5k active employees and their families as of April 1, 2015
• Xerox and Church & Dwight, covering 4k employees
• Towers Watson and Time, covering full-time active employees and dependents.

On the retiree front, recent developments include Blue Cross Blue Shield (BCBS) as a new entrant.  BCBS will partner with Connecture to launch BCBS Marketplace, which will offer the following in 45 states and Washington D.C.:

• BCBS Medicare Supplement Insurance (Medigap)
• Medicare Advantage Plans
• Medicare Part D prescription drug coverage
• Supplemental products, including vision, dental, life insurance, etc.

Although still in its infancy, private exchanges will ultimately transform the entire benefits landscape by the end of the decade.