Moody’s calls brokers winners in private exchangesNews added by Benefits Pro on March 5, 2014

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Joined: September 07, 2011

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By Kathryn Mayer

While most brokers aren’t too happy with the public exchanges, they should be pleased with their private counterparts — at least if they believe the latest from Moody’s.

Moody’s Investor Services said Tuesday that private exchanges are “credit positive” for benefits consultants due to their significant growth potential.

“We expect these firms to build successful exchanges based on their knowledge of employee benefit plans, extensive client relationships and ample financial resources,” the report reads. “The investments in private exchanges and the related market opportunity are credit positive for leading benefit consultants and brokers.”

The rating agency noted that private exchange enrollment could grow to tens of millions of active employees by the end of this decade, from fewer than 1 million enrolled today.

The Moody’s report also said exchange-related earnings for leading consultants, such as Aon Hewitt, Mercer and Towers Watson, will be offset somewhat in the near term by the costs of developing exchanges and by the fact that many enrollees in active employee exchanges are existing clients transitioning from company-specific health plans.

“The most successful exchanges will be those that minimize growth, or generate savings, in overall health care costs, rather than simply shifting costs from employers to employees,” Bruce Ballentine, a Moody’s senior credit officer, said in a statement. “Keys to success include building strong insurance carrier networks, guiding employees to select appropriate insurance coverage, promoting employee wellness, streamlining plan administration, and ensuring compliance with regulations.”

Overall, Moody’s report was a lot brighter for those in the benefits industry than it has been in lately. They recently slammed the administration’s moves to the Patient Protection and Affordable Care Act — including the law’s series of delays and changes — and subsequently changed the insurance sector’s outlook from stable to negative.

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