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To Changing Landscape, Add Private Health Care Exchanges

We've been reporting a lot lately on the troubled rollout of President Obama's signature health care law. But at the same time, there are rumblings of a major shift in the way companies offer private health insurance to workers.

It involves what are called "private health care exchanges." These are similar to — but completely separate from — the public exchanges you've heard so much about.

Some experts say this new approach soon could change how millions of Americans receive their health care.

Dean Carter is the chief human resources officer for Sears Holdings, which means he has shifted more than 50,000 employees onto this new kind of health care system. And he thinks this is the future. "In my 20 years of HR and working with benefits," Dean says, "this fundamentally changes the game."

The change Dean is talking about is kind of like what happened when most companies stopped offering pensions. Instead, many just contribute money to their workers' retirement accounts.

With health care now, some companies are saying: "Here's $300 to $400 a paycheck. Go use that toward buying insurance on a 'private exchange.' "

For years, at big conferences attended by benefits managers, there has been talk about private health care exchanges, with four, five or six different carriers competing on price to offer people insurance. But it seemed to be something maybe 10 years in the future. Then the Affordable Care Act passed. And that made exchanges seem more doable right away for the private sector, too.

"When we began to look at it, and it looked like it was a good idea for our associates and Sears Holdings, we leaned in fast," says Carter.

In the past, the whole company was essentially trapped in a health plan for several years with one insurance company, says Carter: "For two to three years, the entire employee population would be locked in to using that carrier alone. ... If that carrier decided there would be cost increases year on year, you were basically loaded into those cost increases."

But in private health care exchanges, every year multiple insurance companies have to compete on the exchange. And individual employees shop for the various plans, and select an insurance company based on the price they offer for benefits.

"We believe the competitive nature enables us to save on costs and our employees to save on costs," says Carter.

Akshay Kapur, a principal with the consulting firm Booz & Co., studies health care and private exchanges. And he says these exchanges reduce costs, both through competition and by changing employee behavior. "Once you give a fixed amount of money to employees, they will make health care choices that are appropriate or optimal for themselves and their family," says Kapur.

Kapur says that will mean fewer healthy people going to the doctor too frequently. For example, some plans have premiums as low as $5 a paycheck but with a $6,000 deductible. That might be a good option for someone who is healthy and doesn't expect to go to the doctor. Most plans, though, also offer some free checkups, to make sure people are going to the doctor enough to catch any health problems early on.

In theory, these new private exchanges might sound good. But, there are problems.

Christine Trapp, 42, has been battling advanced-stage breast cancer. She also works for a major retailer that's switching to a private exchange, which she says has been having the same kind of problems as the public exchanges. The website wouldn't work, and she couldn't get help on the phone, Trapp says, calling it "very overwhelming and confusing."

And, she says, "contacting the company to get answers was very difficult — 20-, 30-, 40-minute wait times."

As it turned out, her employer is chipping in $417 per paycheck. And with that, she could have gotten a similar plan to the one she had before for a few dollars less per paycheck. But she couldn't figure that out. So she signed up for the most expensive platinum plan because she was scared about losing her doctors and fouling up her cancer treatment. That's going to mean a 25 percent cut in her take-home pay. She makes $37,000 a year and has two kids in college. So for now, Trapp says, she's going to try to save money however she can.

Going forward, as more companies make this shift, will competition rein in rising health care costs for workers? Or will workers end up paying more anyway, because employers keep making them shoulder more of the health care burden?

Copyright 2023 NPR. To see more, visit

NPR correspondent Chris Arnold is based in Boston. His reports are heard regularly on NPR's award-winning newsmagazines Morning Edition, All Things Considered, and Weekend Edition. He joined NPR in 1996 and was based in San Francisco before moving to Boston in 2001.
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