A private exchange is a health benefits marketplace to which an employer
can direct its employees to purchase health coverage from a single or multiple
participating organizations, including insurance carriers and provider
networks.
Human resources consulting firm Findley Davies notes that not all exchanges are created equal and
recommends employers consider the following factors in their decisionmaking
process:
What are the company’s benefit plan objectives, and does
it make sense to move to a private exchange based on these objectives?
Is moving to an exchange cost-effective for the organization
and employees?
What does moving to a private exchange entail?
What are the options for both insured and self-funded
arrangements?
How will offering benefits through an exchange impact the
company’s employment value proposition, as well as its health management
strategy?
What additional fees and commissions are built into the
rates under a private exchange?
The firm
also recommends employers speak with the appropriate advisers or
consultants to review their short- and long-term health care strategies and
take a fresh look at their objectives.
Findley
Davies offers a checklist of issues and questions it addresses when helping
employers evaluate private exchanges. The checklist is here.
August
12, 2014 (PLANSPONSOR.com) – Institutional plan sponsors gained almost 4% in
the second quarter at the median, nearly doubling gains achieved during the
first quarter, according to data from Northern Trust Universe.
Institutional plans continued to benefit from gains in the
domestic and international equity sectors, in addition to smaller gains in
fixed income. During second quarter 2014, corporate ERISA plans (i.e., plans
governed by the Employee Retirement Income Security Act) performed best among
all plans with a return of 4.1%, compared with 2.8% during first quarter 2014.
Northern Trust data also found that public funds netted a
gain of 3.9% at the median, an increase of 2% from the first quarter.
Foundations and endowments followed with a return of 3.5% at the median in the
second quarter, which was more than double the return in the first quarter.
Corporate ERISA plans recorded their fourth consecutive quarterly gain, while
both public funds, and foundations and endowments generated positive returns
for the eighth straight quarters.
The second quarter of 2014 also marked the twenty-first
consecutive quarter without two consecutive quarters of negative median
returns. Institutional plan sponsors have not experienced two consecutive
quarters of negative median returns since the fourth quarter of 2008 and the
first quarter of 2009. Over that five-year span, institutional plan sponsors
have enjoyed a median return of just more than 12.5%, according to Northern Trust.
“The second quarter saw a sizable uptick in the median gain
for all institutional plans,” says Bill Frieske, senior performance consultant,
Northern Trust Investment Risk and Analytical Services, based in Chicago.
“Strong earnings growth and low interest rates have given additional momentum
to equity and bond markets, which have helped plan sponsors to continue their
streak of quarterly gains. All asset classes performed well in the second
quarter as three month returns suggest annual performance that will exceed
long-term expectations.”
Asset allocation per segment during the quarter was as
follows:
Public funds were weighted towards U.S. equity (32.6%)
and international equity (22.9%);
Foundations and endowments were weighted towards private
equity (23.1%) and U.S. equity (19.9%); and
Corporate ERISA plans were weighted towards U.S. fixed
income (37.8%) and U.S. equity (29.3%).
Additionally, Northern Trust shows that during
the second quarter, the median U.S. equity program returned 4.3%. International
equities also had a robust quarter, returning 4.5%. In the alternative sector,
private equity returned 4.2% in the quarter and real estate netted 3.3%. The
fixed income sector returned 2.5%.
Corporate ERISA plans' second quarter performance was
boosted by a combined 42% allocation to both international and U.S. equity
markets. With public market returns performing so well over the last
five years, Frieske says it is not surprising that corporate ERISA plans and public
funds are outperforming foundations and endowments over that time period, given
foundations' and endowments' heavier weighting towards alternatives.
The highest returning asset segment was mid-cap value, up 5.6%,
while core fixed income was up a more modest 2%. At the larger end of the
market-capitalization spectrum, growth beat value but at the mid- and small-cap
end, value outpaced growth. Declining rates favored longer-duration over
shorter bonds and higher risk high-yield and emerging market debt were the best
of the best in fixed income.
Public funds: 17.1%
(one-year), 10.2% (three-year), 13.4% (five-year); and
Foundations and endowments: 15.8% (one-year), 9.2% (three-year), 11.9% (five-year).
The Northern Trust Universe tracks the performance of about
300 large U.S. institutional investment plans, with a combined asset value of
approximately $899 billion, which subscribe to Northern Trust performance
measurement services.
Northern Trust Corporation is a provider of investment
management, asset and fund administration, banking solutions and fiduciary
services for corporations, institutions and affluent individuals worldwide.