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America's 'other' health-care revolution

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"With the profound changes in the insurance market, that distribution methodology is a bit of sideshow," adds Mark Lutes, a health-care lawyer at Epstein Becker Green in Washington, D.C. "We're so Expedia-focused that we think that the solution is somehow the presentation as opposed to the product.... That's just moving around the deck chairs of the Titanic."

Changes already under way in the health-care industry could accelerate the use of online exchanges, however. Over the past decade, large corporations have almost uniformly stopped paying health insurance altogether, opting instead to "self-fund," or "self-insure."

This means that most large private employers today – 83 percent, according to a recent survey by the Henry J. Kaiser Family Foundation – are paying the costs of their employees' health care directly. They still work with insurance companies, because insurance companies are primarily the ones who negotiate with hospitals and care networks on pricing. In that sense, employers are simply "renting" the insurance company's networks, and paying them an administrative fee to process their employees' claims. But if a worker gets sick, the employer pays the bill. The employer does often pay for a "stop-loss" insurance policy, which will cover claims over an amount like, say, $20,000.

And Obamacare currently exempts self-insured plans from many of its mandates, including the $6,350 cap on out-of-pocket expenses for individuals and $12,700 for families.

What this means is that self-funded companies will be able to utilize the personalization that an insurance exchange can offer. All other plans, including those on Obamacare's exchanges, will be much more constrained by the law's mandates.

The exchanges may appeal to many smaller companies in particular. More and more smaller firms are looking to stabilize their health costs by giving employees set amounts of money per month to purchase individual health insurance plans. While this approach has been tried in the past, it turned out to be an administrative nightmare, since companies that had a relationship with a single insurance carrier suddenly found themselves having to deal with five or more carriers. Under the new public and private exchange systems, though, the administrative details can be taken care of much more easily with Internet-based management software.

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