August 18, 2016 | Rosemarie Day

Future of Exchanges: Which Model Will Prevail? Public or Private?



The early estimates of public and private exchange enrollment were ambitious: 25 million for public exchanges and 40 million for private exchanges (by 2018). Based on the actual numbers we are seeing, we’ve developed our own high and low estimates.  We project public exchange enrollment to be in the range of 15-18 million by 2018 and private exchange enrollment to be in the range of 13-23 million by 2018.



Some things to note about our estimates:

  • There is no major magic here – we developed trend lines from the actual data and extended them to get into the right ballpark in 2018.
  • The estimates we generated are lower than earlier estimates from the Congressional Budget Office (for public exchanges) and Accenture (for private exchanges). Accenture’s estimate for 2018 private exchange enrollment (40 million) is no longer applicable because it was linked to the Cadillac tax, which is now deferred.
  • These estimates encompass a broad range. Where enrollment actually lands will depend on the key enrollment drivers, which we discuss below.


There have been a few key drivers in both public and private exchange enrollment growth.  Our summary assessment of their future impact is noted by the red arrows in the graphics below, and explained below that.




  • Funding for navigators and assisters is drying up and will continue to decrease. This will hinder enrollment because marketing and outreach are some of the largest drivers of enrollment currently.
  • The future impact of technological improvements on enrollment is somewhat unknown. The large problems that inhibited enrollment early on have been resolved. There is room for growth in making platforms more consumer friendly, but it is unclear the impact these improvements will have on driving enrollment.
  • We will likely see an increase in tailored plan designs. More affordable products that are attractive to consumers will likely drive some increased enrollment.
  • The impact of tax penalties on enrollment is unclear. Some people don’t fully understand the tax penalties yet; however, there is evidence that a portion of the population would rather pay the tax than sign up for insurance.




  • Consumer expectations will continue to rise about online shopping, including being able to shop for insurance online, especially as millennials continue to enter the marketplace.
  • Rising premium costs will still be the number one driver for employers. Most employers are trying not to drop coverage, so they will consider private exchanges more actively if they see savings opportunities.
  • It is unclear if the consumer-driven health plan market has been saturated or if it will continue to drive enrollment in private exchanges.
  • The Cadillac tax is currently deferred to 2020. If it remains on the horizon, expect to see more interest in private exchanges. If dropped, still expect growth, but not as dramatic.



Based on our understanding of the current enrollment drivers, we project slower growth in public exchange enrollment (leaning toward low estimates) and moderate growth in private exchange enrollment (leaning toward higher estimates).  This would lead private exchange enrollment to exceed public exchange enrollment by 2018.

That being said, none of this growth will happen “automatically.”  Exchange leaders in both sectors will have to work hard to achieve these growth projections.  They are still in a very volatile space due to the rapid nature of technology changes, seemingly voracious demands of consumers, and the politics around public exchanges.  Exchanges have to continually establish and refine their value proposition.  This work is not for the faint of heart!  Rest assured, if you spend time in the exchange space, whether public or private, it will never be boring.