Towers Watson & Co (TW) is on track to be the leader in providing health care exchanges to private companies as the industry projects a major shift that could see up to 40 million individuals on exchanges by 2018, says Mark S. Marcon, Senior Analyst at Robert W. Baird & Co.
“Towers Watson is the largest pure play HR consulting firm in the world, and what is really intriguing about them is that they have a leading position in providing health care exchanges to private companies for providing health care benefits both to retirees, which is the more mature part of their business, and to active employees. This is a relatively new offering, but it’s taking off very quickly, where companies are basically shifting from providing a defined benefit in terms of the health care coverage that they provide and instead offering to provide health care services through exchanges, which enables an employer to basically have a better level of control in terms of the rise in their health care costs,” Marcon said.
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While Towers Watson has been the leading solution as it relates to the retiree market, the company is now rapidly positioning itself as the leader in the active employee market, Marcon says. He expects a massive shift on the health care side to exchanges, with TW being a major beneficiary.
“There are less than a million people that are currently on these private health care exchanges, and there have been projections by some health care consultants independent of Towers Watson…that would indicate that by 2018 there is a possibility that 40 million individuals could end up being on these exchanges,” Marcon said. “The valuation of Towers Watson is basically more reflective of their core recurring revenue stream business and continues to be fairly modest. We’re just in the early days of recognition of their positioning within this rapidly growing health care exchange market.”
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