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America Could Save Big with Employer Health Care Shakeup

Here’s a trend we’d like to see more of: the WSJ last week reported that companies are increasingly setting up private exchanges similar to but separate from the ACA exchanges. The scheme is simple: the company gives its employees a lump sum of money, and they get to choose which kind of plan they buy on an internal exchange (and, presumably, keep whatever they don’t spend). The results?

Operators of employer health-insurance marketplaces say many workers pick cheaper coverage than they previously had and that is one way the exchange approach can save money.

In an exchange run by Liazon Corp. that has around 60,000 people enrolled, about 75% of the workers have chosen less-expensive plans, accepting bigger deductibles and other out-of-pocket charges, as well as smaller choices of health-care providers and restrictions such as primary-care gatekeepers. “They want value for their money,” said Alan Cohen, Liazon’s chief strategy officer.

This is an encouraging development, both because it gives employees more choice and because it incentivizes exactly the kind of cheaper plans that are slowing down health care spending nationwide. How broadly applicable this proves to be is still an open question: the article points to a smaller business—a spirits company with 20 employees—creating an exchange for its employees, but the barriers to entry for setting up such a framework for smaller businesses could discourage adoption.

Even so, we’re glad to see private exchanges spreading, and we hope other companies will join in and continue experimenting.

[Photo of stethoscope and money courtesy of Shutterstock.]

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