Getting people to behave like bargain-hunting consumers who seek high quality and low prices when they shop for medical services just might be the final frontier in health care reform — and it's where Alan Cohen is working.
Six years ago Cohen co-founded Liazon, a leading provider of "private exchanges" to employers. Instead of the employer choosing a handful of health plans for the whole company, Liazon works with the employer and health insurers to roll out a suite of health plans that the employees can compare. The employer gives workers a set amount of money to spend, and the workers go online and get Web-based coaching from Liazon to help them shop the private exchange for the plan that best suits their family's needs and their budget.
The choices may range from low-cost, high-deductible plans in which premiums are entirely covered by the employer's contribution, to "richer" plans that require workers to contribute more out of their own pocket.
So far, Liazon has helped about 200,000 employees from 2,500 employers shop for their own health plans. Cohen said that, when given the ability to make their own choices, employees will often buy less expensive coverage with higher deductibles, often linked to a health savings account where they can save money on a tax-deferred basis to pay their out-of-pocket expenses.
Cohen added that both employers and their workers often wind up spending less on health insurance via the private exchange, which typically offers 12 to 20 different choices. He said Liazon has found that 60 percent of people choose plans that are in the lower third of the cost spectrum, and 23 percent choose plans in the highest third.
Private exchanges have been introduced over the past two years across the country. They include exchanges where multiple insurance companies offer plans, as well as exchanges offered by a single employer. Last summer, Horizon Blue Cross Blue Shield of New Jersey launched its own private exchange, Horizon Select, and AmeriHealth New Jersey launched MyAHNJ, a private exchange with an online portal provided by Liazon.
Aetna launched its proprietary private exchange, Aetna Marketplace, in the third quarter of 2013 in Florida and Illinois and last month expanded it to New Jersey, Maine, Georgia and Texas, according to spokeswoman Susan Millerick. She said Aetna participates in the national, multicarrier private exchanges and works with Liazon and other exchange providers.
Millerick said Aetna Marketplace was rolled out this year to the small group market, consisting of employers with fewer than 50 workers, and will expand to the middle market in 2014.
"Employers are always seeking new ways to get their employees the benefits they need but also to control costs," Millerick said. "What is exciting about the private exchanges is that they help employers simplify or even in some cases eliminate a lot of their administrative responsibilities."
Millerick said private exchanges are an important distribution strategy across every area of Aetna's business.
Cohen spoke Tuesday at a conference in West Trenton, sponsored by the New Jersey Health Care Quality Institute, on the health care sector's move to become more like retailers who deal directly with consumers.
"Being a consumer in health care starts with health insurance," Cohen said. He said employers have an incentive to offer health insurance because they get a tax deduction for the premiums they pay. But he argued that it's inefficient for employers to choose health plans for their employees. Cohen said when given a wide menu of plans and prices, employees often buy less extensive health coverage than their employer had offered them, and in some cases will opt to reallocate some of the money to different options such as disability or life insurance.
"The way in which we have all gotten health insurance and dental insurance and life and disability insurance over the years is just simply wrong from an economic standpoint," he said.
Cohen said insurance is about "protecting myself and my family from things that could happen. It is as personal as the car you drive, the house you live in, the homeowners insurance you buy, the investment you make in your own retirement plan. And the fact that these decisions are made for us by [the employer's] head of human resources or the chief financial officer just doesn't make any sense. Every person really needs to be engaged in this in an individual way, and people's needs are dramatically different."
He said with a private exchange, companies get more predictability about their health insurance costs. The company may need to budget an increase each year, but the wide range of plans being offered, many of them less expensive plans, helps to mitigate the costs increases.
Cohen said employees who buy less expensive plans may be taking more risk via a higher deductible plan or choosing a plan with a narrower network of providers that may accompany lower-cost plans. While on average the employers offer less than 20 plans, Cohen said a 40-plan private exchange is not uncommon: "Consumers are used to having a lot of choices," he said.