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Broadly defined, private exchanges are websites that enable consumers to compare and purchase health insurance, typically with a defined contribution provided by their employer. Most are operated either by insurance companies themselves, benefit consultants, or technology platforms. (Private exchanges should not be confused with the public health insurance exchanges established as a result of the Affordable Care Act, see “Public vs. Private: What’s the Difference?” below.)

While some firms were quick to establish private exchanges over the past couple of years, others are taking a wait-and-see approach before launching one. At the end of last year, the Kaiser Foundation identified about 20 private exchange platforms with about 2.5 million people enrolled through them (not including what Kaiser defines as e-brokers selling to individuals rather than to groups). Exchange platforms predict significant growth (often greater than 100 percent) year over year.

Single vs. Multi-Carrier Exchanges
Most private health insurance exchanges can be divided into two types—single carrier exchanges and multiple carrier exchanges. A single carrier exchange promotes one company’s products to members and employers. Multiple carrier exchanges connect employers and their employees to a variety of coverage plans from a number of different insurance companies. (See chart, “Two types of private exchanges, with many variations,” below.)

While single carrier exchanges are operated by one insurance carrier, multiple carrier exchanges can either be a fully competitive model where a set of health plans compete side-by-side or its line-up of plans can be customized by the employer or the exchange

According to a report from Booz & Company, a global management consulting firm that produced a series of white papers on the topic, “. . . preferences for the type of private exchange model are likely to vary. . . . research shows that most employers favor multi-carrier exchanges to provide broader choice to their employees, limit the burden of administering a more complex offering, and yet stay somewhat involved in the options employees can select.”

However, the same consulting firm found that a substantial percentage prefer single carrier exchanges: “. . . roughly 30 percent of employers would prefer single carrier exchanges. This preference may be due to their legacy relationships with single carriers, along with their interest in choosing carriers and designing plan benefits (including keeping their group rating) to better recruit and retain talent.”

Among the private exchanges launched early that represent both types and include the opportunity to sign up for vision coverage are Aon Hewitt’s Aon Active Health Exchange, Buck Consultants’ RightOpt exchange, Mercer Marketplace, and Towers Watson’s OneExchange.

Vision Companies Onboard
“We started participating in private exchanges as soon as they became available,” said VSP Vision Care’s president Jim McGrann. “A couple popped up in 2013, which is the first year we got involved. We are present in almost all of the private exchanges, either directly or white labeled through our alliance partners. We’re looking for their competitive edge over the public exchange market.”

McGrann told Vision Monday that among the exchanges in which VSP participates are Buck’s RightOpt exchange and an exchange operated by Aflac as the sole vision care provider, in Mercer Marketplace as one of many vision plans, and on the Aon Active Health Exchange as one of four vision plans.

“MetLife, UnitedHealthcare, and VSP have been with us since Jan. 1, 2013, and EyeMed was added Jan. 1, 2015,” Rob Malley, VP of Aon Exchange Solutions, told Vision Monday. Employers offering vision plans through the Aon Exchange more than doubled from 11 in 2014 to 23 in 2015, according to Malley.

“EyeMed will be in all of the exchanges that make sense to us,” said John Lahr, OD, VP/medical director of EyeMed Vision Care. The EyeMed private exchange team manages relationships with 15 to 20 exchange operators, according to a company spokesperson, who told Vision Monday that the number is changeable.

Davis Vision is currently participating in four private exchanges, three of which rolled out Jan. 1, 2015, “so they are in their infancy, start-up phase,” said Davis Vision president Celina Burns, who estimates that the company serves about 2,500 members through the private exchanges. Davis Vision is also the first vision participant on SpendWell, a unique exchange that defines itself as a direct-care marketplace that “is bringing e-commerce to routine health care services.” Another vision plan is expected to join SpendWell soon. (See “Spendwell: A Unique Type of Exchange.”)

This year, UnitedHealthcare launched its own proprietary private exchange that will offer vision plans. The company also participates in other private exchanges, including ones run by Aon, Mercer and Liazon, according to a company spokesperson. Dave Bailey, senior vice president and national practice leader of UnitedHealthcare Specialty Benefits, said, “Participating with the major private exchange options in the marketplace is an exciting distribution channel for us. When they first hit the market, it was more of a larger group play, but now it’s trickling down to mid-size and small group employers as well. We have a lot of demand and a lot of opportunity as they start to get more traction to convert them into new members.”