New Insurance Option Offers More Choices for Workers, Fixed Costs for Employers

Andrew Kitchenman | August 13, 2013 | Health Care
AmeriHealth says advances in technology and advent of “marketplaces” under the ACA enable insurers to set up private exchanges

Mike Munoz, senior vice president of sales and marketing at AmeriHealth NJ.
Many New Jerseyans search online for cars, homes and even potential mates.

Now people covered by AmeriHealth New Jersey will soon be able to do the same with health insurance.

The company has announced that it will be offering the option of a private health insurance exchange to all of its business customers.

The online exchange, similar to the federal health insurance marketplace or exchange that will begin enrollment on October 1, will allow workers to choose among health plans.

This program more tailored compared to health insurance choices now available to employees, including a detailed series of questions designed to help employees find the best option to fit their individual needs.

The advantage to employers is that they will be able to choose a fixed contribution for each employee, bringing cost certainty to the annual process of renewing insurance contracts.

For example, a company might decide to pay $5,000 annually to cover employee insurance premiums. Employees will have to decide whether to choose a less-expensive plan with a smaller network of providers, which may be largely or entirely covered by the employer contribution, or to pay extra for a health plan with a larger network of providers.

The AmeriHealth program will begin with two choices – a lower-cost option with a provider network limited to New Jersey and a higher-cost plan that includes out-of-state doctors — but AmeriHealth’s ultimate goal is to offer six different plan packages, with four different price levels within each package.

“A younger employee may not be as interested in having as broad a network or as rich a benefit,” as older or higher-paid workers, according to Mike Munoz, senior vice president of sales and marketing for AmeriHealth.

The concept of similar “defined contribution” plans was widely discussed in the late 1990s, noted Paul Fronstin, a senior research associate with the Employee Benefit Research Institute, a Washington, D.C., nonprofit.

However, few companies adopted the plans, perhaps because the regulatory infrastructure for exchanges wasn’t in place.

Two things have changed since then – rapid advances in data tools allowing easier comparison between plans and passage of the 2010 Affordable Care Act, which has online marketplaces or exchanges as its centerpiece, Fronstin noted. The combination has helped increase employers’ interest in private exchanges.

Fronstin noted that the exchanges have some elements that are familiar from traditional employer health plans, including the fact that the employer chooses the insurance provider and that workers have been given the option of choosing between health maintenance organizations (HMOs) and preferred provider organizations (PPOs) for years.

But other aspects are new, including the potential for a wider range of choices for employees, “which some people will love and some people will hate,” he said.

AmeriHealth contracted with New York-based company Liazon to design the exchange.

Regarding the questions that will help employees choose the plan that’s best for them, Munoz compared the process to that of the dating website eHarmony, in which a series of questions pairs users with potential mates. These questions could, for example, lead an employee to a plan that includes good dental and vision coverage but otherwise minimal health insurance.

“In this new world and this whole individual exchange, the employee has more choice, has more variability in how they structure their benefit,” Munoz said.

Liazon CEO Ashok Subramian said the questions that are constantly being adjusted to make it easier to navigate.

“You don’t have to be an actuary to use our system and choose an insurance product and make the best decision for you and your family,” he said.