Private Exchange ACOs Emerge as Next Generation ACO Model

Public health insurance exchanges (exchanges), created by a provision of the Patient Protection and Affordable Care Act (ACA), have received considerable attention as the ACA has started to expand health insurance coverage to previously uninsured individuals.1 These exchanges alone are expected to provide coverage to approximately 13 million individuals in 2015, a significant increase over the average coverage of individuals by exchanges in 2014, of approximately 7 million individuals.2 Private exchanges are also grabbing the attention of consumers,3 with enrollment in private exchanges expected to equal the enrollment in public exchanges as early as 2017.4 This increased interest in private exchanges is primarily from employers that are looking to cut healthcare costs, as well as from individuals who do not qualify for federal subsidies and are examining their alternatives in order to comply with the Individual Mandate provisions of the ACA.5 Therefore, both public and private payors are devising innovative strategies, such as partnering with Accountable Care Organizations (ACOs), to capitalize on the increasing demand for affordable health insurance plans, which offer the consumer a range of health insurance plan options.6 This article will discuss these new private exchange ACO models, as well as the driving factors behind the increased interest from consumers in choosing private exchanges over
public exchanges.

Within the first three months of open enrollment for the federal exchanges in 2013,7 the largest private health insurance exchange provider, eHealth Insurance, experienced a 50% increase in enrollments from 2012.8 This dramatic increase in enrollment was not unexpected, due to the implementation of the ACA,9 but also follows a trend of U.S. employers shifting their health insurance offerings to private exchanges.10 According to a 2014 Aon Hewitt survey, only 5% of employers in 2014 offered private health exchanges; however, the survey projects that this value will increase by 33% in the next three to five years.11 Private exchanges are attractive to the employer because:

(1) They can constrain premium growth due to direct competition between insurers for customers; and,

(2)  They are able to offer the employee a wider range of choices in healthcare plans.12

Other employer benefits which may be realized through the move to a private exchange include:

  1. Improve predictability of healthcare costs by transferring risk to the insurance carrier”;13
  2. Increase ability to focus efforts on other initiatives, such as health/wellness programs”;14
  3. Ability to “[a]lign health care benefits/subsidies with overall employee compensation”;15
  4. Ability to “[m]inimize employer’s plan design and vendor management responsibilities”;16
  5. Improve competitiveness of current benefits”;17 and,
  6. Reduce long-term cost trend through competitive market forces.18

Another added value for private health insurance exchanges is the ability to offer health and wellness programs. The ACA provides new incentives to employers to promote wellness programs and support healthier workplaces.19 As private exchanges proliferate in the marketplace, offering comprehensive wellness programs will be an important strategy for consumers and employers to differentiate between plans.20 With the paradigm shift from volume-based care to value-based care, wellness programs are becoming an essential component to mitigate risk, by reducing emergency care visits and hospital admissions.21 Therefore, as providers begin to adopt value-based care models, some are looking to ACO models that emphasize quality care while providing services to aid in managing
population health.22

Value-based health insurance contracts have a different focus from conventional insurance products, in that their priority is on structuring agreements that focus on keeping patients healthy, while avoiding unnecessary costs.23 Therefore, it is relatively easy to identify a collaborative care model, inherent to ACOs, as beneficial to a value-based health insurance plan. Industry experts agree that private exchanges align well with value-based care, and are predicting that the partnering between private health exchanges and ACOs is an emerging care model for insurers.24

Two of the major players taking advantage of this new emerging care model are Aetna and Bloom Health, both of which are rapidly expanding.25 Bloom Health’s private ACO exchange is offered by approximately 250 employers,26 and has a 51% selection rate for ACOs in their private exchanges,27 indicating that customers may increasingly desire the options available to them through an ACO. Another option consumers can explore is Aetna’s private-label health plan, which is a component of the company’s larger plan to create a national ACO chain that can address large employer populations in specific markets.28 Aetna notes that “ACOs can bring very attractive value propositions (cost and quality) in their market where the ACO provider partner has strong local market recognition.29 This local market recognition is essential to their effort to localize purchases, reasoning that providers may sometimes have stronger local reputations and relationships than a national health plan, and this reputation could increase the health plan’s overall market share.30

The partnering of private exchanges with ACOs represents a new innovation in the fight for market share and value-based care. Private exchanges may still be considered a “progressive experiment” by some, but with the increased emphasis on high quality care at a lower cost, it is likely that these private exchanges could have the flexibility required to meet these value-based care goals.31 ACOs are also at the forefront of streamlined care, and thus will be an attractive option on the private exchanges, because they offer an easy option for employers to purchase health plans with an emphasis on population health.32

"Are You Ready? Private Health Insurance Exchanges Are Looming: Accenture Research shows: By 2017 nearly 1 in 5 Americans will purchase benefits from a health insurance exchange, yet consumers are unaware and ill prepared" Accenture, 2013, (Accessed 1/5/2015).

"Table 2: Effects of the Affordable Care Act on Health Insurance Coverage" found in "Insurance Coverage Provisions of the Affordable Care Act-CBO's April 2014 Baseline" Congressional Budget Office, April 2014, (Accessed 1/5/2015).

"Private exchange sees surge in health care enrollment" By Kelly Kennedy, USA Today, (Accessed 1/5/15).

Accenture, 2013.


"The Emergence of Private Health Insurance Exchanges Fueling the 'Consumerization' of employer-Sponsored Health Insurance" Booz & Company, 2012, (Accessed 1/5/2015).

"Narrative Description of Marketplace Timeline" Centers for Medicare & Medicaid Services, April 22, 2013, (Accessed 1/5/2015); "Private exchange sees surge in health care enrollment" By Kelly Kennedy, USA Today, (Accessed 1/5/14).

Kennedy, “Private exchange sees surge in healthcare enrollment, February 20, 2014.


"Private insurance exchanges attract more employers" By Paul Demko, Modern Healthcare, June 7, 2014, (Accessed 1/5/14).

"2014 Health Care Survey: Future Ready. Real Now." Aon Hewitt, 2014, (Accessed 1/5/2015).

Demko, "Private insurance exchanges attract more employers", June 7, 2014.

Aon Hewitt, "2014 Health Care Survey: Future Ready. Real Now.", 2014.



Aon Hewitt, "2014 Health Care Survey: Future Ready. Real Now.", 2014.



"Fact Sheet: The Affordable Care Act and Wellness Programs" United States Department of Labor, (Accessed 1/5/2015).

Booz & Company, 2012.

"Turning an ACO into an Insurance Product: The best way to capitalize on a relationship with a value-based healthcare provider is to productize it. Why have so few health plans taken that step? And how do you do it?" By Patrick Barlow, Steve Wolin, Shivani Shah and Nilam Shah, Oliver Wyman, October 2013, (Accessed 1/5/2015); "From Fee for Service to Value Based Care Under the ACA" Optum, April 2013, (Accessed 1/5/2015).


Barlow, Wolin, Shah, Shah, and Wyman, October 2013.

"Industry Observers Predict Private Exchange-ACO Relationships as an Emerging Care Model for Insurers in AIS Newsletter" Atlantic Information Services, Inc. (AIS), May 7, 2014, (Accessed 1/5/2015).

"ACOs and Private Exchanges May be a Good Match" By Paul Barr, H&HN Senior Writer, Hospitals & Health Networks, May 14, 2014, (Accessed 1/5/2015).

"The next generation of Private Exchanges is already here: ACOs in Action" Bloom Health, March 2014, (Accessed 1/5/2015).

"Examining Private Exchanges in the Employer-Sponsored Insurance Market" By Alex Alvarado, Matthew Rae, Gary Claxton, and Larry Levitt, Kaiser Family Foundation, September 2014, (Accessed 1/5/2015).

"Aetna Readies Plan to Offer ACO Products via Private Exchanges" By Jane Anderson, AIS Health, June 2014, (Accessed 1/5/2015); Bloom Health, March 2014.

Barr, “ACOs and Private Exchanges Maybe a Good Match”, May 14, 2014.

"Aetna Joins With Providers in Private-Label Health Plans: A partnership with a respected hospital system or large physician practice could increase a health plan's market share" By Thomas Reinke, Managed Care, July 2013, (Accessed 1/5/2015); Anderson, 2014.

"Insights on the World of Private Healthcare Exchanges" Gruppo Marucci, July 2013, (Accessed 1/5/2015).


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