Health exchange IT market to balloonNews added by Benefits Pro on March 28, 2014

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Joined: September 07, 2011

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By Dan Cook

The insurance exchanges spawned by the Patient Protection and Affordable Care Act represent a huge opportunity for the IT industry. But the big bump in revenue generation will come from the private exchanges, not the public ones, says a report by MarketsandMarkets.

The research results released by the consulting and data-crunching firm gages the IT piece of insurance exchanges in 2013 at $1.6 billion. That will rise to $2.6 billion by 2018.

While the public exchanges currently represent the lion's share of IT spending, the private markets will catch up and surpass public exchange spending. The private markets, the report notes, were mostly either recently launched in the last year. (Some have been up and running for several years.) But other research has shown intense interest in the private exchanges by companies eager to identify alternatives to defined benefit health coverage for employees.

Essentially, the heavy lifting for IT with the public exchanges will soon come to an end, as state and federal exchange platforms inevitably work out the bugs. IT work will shift to maintenance on these exchanges.

But the demand for private exchanges will lead to an ongoing output of new exchanges, thus creating the opportunity for IT.

“Despite the largest share carried by public exchanges, private exchanges overtake significantly in terms of market growth,” the researchers said. “Currently, the private health insurance exchange market is in its nascent stage. However, the concept of private exchanges gained a much higher attention in 2013 with the introduction of the ACA due to which exchange discussion started to take off in the real sense. Skyrocketing health care costs are making increasing number of employers to shift from traditional defined benefit plans to defined contribution plans helping them to manage costs as well as benefit their employees.”

Among the drivers of this IT uptick, the report said, are federal health insurance mandates, federal funding, the trend toward the defined contribution model, the desire to reduce health care costs, efforts to make health care affordable, growing health care IT adoption, and the shift toward integrated environments.

The United States will dominate the health exchange market, the report said, muscling in for more than 95 percent of the overall global market.

“The U.S. is expected to continue to lead this market during the forecast period. The European market currently has a miniscule market share, growing at a lower rate mainly due to economic crisis, cultural barriers to IT adoption, and lack of initiatives for implementing HIXs. Currently, Asia and the Rest of the World do not have a measurable stake in this market. However, increasing HCIT and HIE adoption, decent IT skills, and the increasing outsourcing trend will generate revenue in terms of private exchanges in this market in the near future,” the report said.

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