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Willis Towers Watson analysis of the outlook for private exchange solutions

By John Barkett | May 26, 2020

The following is a market update from Willis Towers Watson.
Health and Benefits|Retirement

The following information and analysis are intended for advisors who recommend private exchange solutions to their employer clients. While the future of individual exchange price and availability trends across all demographics is likely to be impacted by the COVID-19 pandemic, we see good reasons to believe these marketplaces will continue to offer favorable benefits delivery solutions.

The exchange model for retiree benefits is built on the underlying market for individual health plans. The model is attractive when plans are affordable from one year to the next. Individual Medicare plans (Medicare Advantage, Part D, Medigap) have delivered value and stability for more than a decade. Individual and family plans (IFP) have, in recent years, begun to consistently offer competitive prices to pre-Medicare retirees. While carriers will find it challenging to account for COVID-19 in their 2021 plan offerings, the underlying fundamentals of both the Medicare and IFP markets should lead to continued robustness next year.

Medicare plans saw continued stability in 2020. Average Medicare Advantage premiums declined 14% from 2019 to 2020 on average, while the average number of plan choices per county was up 18%. Average Part D plan premiums also declined, though these lower premiums are partly a reflection of higher out-of-pocket costs for retirees in 2020. Medigap plans entered a new era in 2020, as the two most popular plans, Plans C and F, were phased out for new beneficiaries, and two nearly identical plans, Plans D and G, took their place. The 21st Century Cures Act of 2016 called for the discontinuation of Plans C and F, and the ample lead time allowed the industry to prepare for the changes, which resulted in minimal disruption to beneficiaries in 2020.

The IFP market also showed signs of stability in 2020. Average premiums dropped for the second consecutive year. Eighteen states saw a new carrier offer plans for the first time, while 54 plans expanded their footprints within a state. IFP plans continued to earn healthy margins as well, while overall enrollment held steady.

The COVID-19 pandemic makes it difficult to predict what will happen to the Medicare and IFP markets in 2021. Significant levels of care are being deferred to create capacity for patients with the virus and slow its spread. Whether that trend affects 2021 premiums will depend on the development of treatments, the occurrence of a second viral wave, and our health system's ability to expand its capacity for treating COVID-19 and non-COVID-19 patients. Yet the recent announcement that UnitedHealthcare would re-enter the IFP market suggests it is now seen as viable by insurers who left the market three years ago. Major Medicare Advantage carriers are looking for ways to rebate money to beneficiaries. While this evidence is anecdotal, it points to carriers’ ability to weather the pandemic and their continued participation in the individual Medicare and IFP markets next year.


Senior Director of Policy Affairs at Willis Towers Watson

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