HealthCare Exchange Solutions - 2015 3rd Quarter Issue by The Institute for HealthCare Consumerism

Third Quarter 2015

Exchange

About Innovative Health and Benefit Marketplaces

Blue Directions Building a High-Performing Consumer Environment Who Needs a Private Exchange Anyway? Private Exchanges Leading to “Buy-down” and “Buy-up” Effect The Business Case for Private Exchanges

The Official Magazine of

Exchange www.theihcc.com

INSIDE FEATURE 14 Blue Directions: Moving to a High-Performing Consumer Environment

STATS & DATA 9

Private Health Insurance Exchanges Demonstrate Their Business Value According to a recent study from Array Health, insurers are seeing a notable reduction in their administrative burden as well as an increase in their market share as a result of operating a private exchange.

Not so long ago, in the early days of private exchanges, there was hardly a consensus on what they would mean for employer-sponsored health insurance. There were plenty of opinions on best practices, what makes a good platform and how much interest employers would have in moving their employees to a private exchange.

By Lance Hood, Senior Director of Marketing, Array Health

PERSPECTIVES 10 Private Exchanges Leading to Both a “Buy-down” and a “Buy-up” Effect In a private exchange environment, employees typically purchase less medical coverage (sometimes called the “buy-down” effect), leaving money available to purchase other benefit options (the “buy-up” of voluntary benefits). By Rob Harkins, Vice President of Private Exchanges, and Jon Trevisan, Senior Vice President and Director of Placement, Willis Human Capital Practice

11 Who Needs a Private Exchange Anyway? Chances are by now, the average broker, consultant or employer has evaluated four or five different flavors of “private exchanges” in the past 12 months. As we enter into the fourth quarter of 2015 one thing is for certain: there is still confusion about what a private exchange is and how employers can benefit from one. By Frank B. Mengert, Director of Exchange Technology, ebenefit Marketplace

12 Midsummer Reflections on a Favorite Subject… Exchanges It’s been about a year and a half since I joined We now know there is plenty of interest, with 47 percent of employers considering a private exchange by 2018 and enrollment projections of 40 million for that same year. This has led to a vast array of platforms from consultants, technology companies and even carriers themselves jockeying for position within the emerging market. And with many platforms come many value stories: from single-carrier to multi-carrier exchanges; carrier-administered versus consultant-administered; consumer-driven enrollment and streamlined administration for HR administrators just to name a few. One focus that has not deviated, however, has been the emphasis on the front-end abilities of private exchanges. By Lisa Feddema, Executive Director, Private Exchange Management, and Bob Quigley, Consultant, Private Exchange Management, Health Care Service Corporation

Lockton as director of the Exchange Solutions Practice. In that time, some of the assumptions we (and by “we”, I mean all of us in this industry) had about the private exchange space have missed the mark, some are on point and others are emerging as developing trends. By Mike Smith, Assistant Vice President, Director, Exchange Solutions, Lockton Benefit Group

Publisher’s Letter CEO and Publisher Doug Field covers the latest trends in private exchanges and shares what’s happening at The Institute for HealthCare Consumerism around exchanges.

6-7 Briefs & Innovations Keeping you up-to-date with the latest news, research and innovation in health insurance exchanges (both public and private) and defined contribution. HealthCare Exchange Solutions™ I www.TheIHCC.com I Third Quarter 2015

PUBLISHER

Exchange www.theihcc.com VOLUME 2 NO. 3 | THIRD QUARTER 2015

Building a Consumerism World with Private Exchanges

Published by FieldMedia LLC 292 South Main Street, Suite 400 Alpharetta, GA 30009 Tel: 404.671.9551 • Fax: 770.663.4409 CEO

Doug Field 404.671.9551 ext. 101 · dfield@ theihcc.com CHIEF MARKETING OFFICER

If you picked up a copy of this magazine, chances are you’re at our Private Exchange FORUM in Baltimore. We’ve been preparing for this for months and are glad to finally kick off our second Private Exchange FORUM of 2015 — this time in Baltimore. It’s evident from turnout at our private exchange events that exchanges are a hot topic, and we hope the knowledge you gain from this helps you now and in the years to come. Like our event, each issue of HealthCare Exchange Solutions that we publish is full of relevant information about this new world we’re all navigating.

Andrew Dietz adietz@theihcc.com MANAGING EDITOR

Jonathan Field jfield@theihcc.com SENIOR EDITOR

Heather Loveridge hloveridge@theihcc.com RELATIONSHIP MARKETING MANAGER

JJ Atherton jjatherton@theihcc.com DIGITAL MARKETING MANAGER

In this issue, our editorial team has compiled a number of timely articles, including our feature “Moving to a High-performing Consumer Environment”. Written by Lisa Feddema and Bob Quigley at Health Care Service Corporation, one of the nation’s largest health insurers, the article discusses their private exchange for large employers — Blue Directions — and how it’s focusing on health and wellness and providing an array of offerings designed to improve consumer experience. While many of us in the industry are very familiar with private exchanges, the fact remains that many are still confused about what it is and how it can help employees. Frank Mengert, director of exchange technology for ebenefit Marketplace, tackles this topic, giving his perspective by answering the question “Do I need a private exchange?” I also appreciate the insights from Rob Harkins and Jon Trevisan at Willis into how private exchanges are prompting consumers to “buy-down” and “buy-up” in regard to major medical and voluntary benefits. This year’s open enrollment season will be an important time for private exchanges — giving everyone a better look at their growth as well as consumer opinions and experiences. To help us plan our 2016 conferences and content, I’d love to hear your thoughts on this year’s open enrollment. You can reach me on Twitter @dougfield52 or at the email address below.

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Sincerely,

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HealthCare Exchange Solutions™ is a trademark of FieldMedia LLC. HealthCare Consumerism Solutions™ is published eight times yearly by FieldMedia LLC., 292 South Main Street, Suite 400, Alpharetta, GA 30009. Periodical postage paid at Alpharetta, GA and additional mailing offices. TO SUBSCRIBE: Make checks and money orders payable to HealthCare Exchange Solutions ™ magazine 292 S. Main Street, Suite 400, Alpharetta, GA 30009 or visit www.theihcc.com. Non-qualified persons may subscribe at the following rates: single copy $7.50; $75.00/yr in the U.S., $105/yr in Canada and $170/yr international. Please contact FieldMedia at 404.671.9551 or subscriberservice@fieldmedia.com for name/address changes. PRINTED IN THE U.S.A. HealthCare Exchange Solutions™ is designed to provide both accurate and authoritative information with regard to the understanding that the publisher is not engaged in rendering legal, financial or other professional service. If legal advice is required, the services of a professional adviser should be sought. The magazine is not responsible for unsolicited manuscripts or photographs. Send letters to the editor and editorial inquiries to the above address or to jfield@fieldmedia.com. Permission to reuse content should be sent to, jfield@ fieldmedia.com.

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NEWS BRIEFS & INNOVATIONS

NEWS BRIEFS EPIC Launches Private Exchange in Partnership with Hodges-Mace EPIC Insurance Brokers and Consultants, a retail property and casualty insurance brokerage and employee benefits consultant, recently unveiled its next generation private exchange, coined EXP (The EPIC Exchange Platform) in partnership with Atlanta-based Hodges-Mace. The integrated offering includes robust benefits administration and enrollment, advocacy through a licensed call center and actuarially-based decision support tools that empower employees to select benefit plans specifically suited to their personal needs while managing ongoing benefit program costs. EXP delivers multi-option enrollment and online decision support tools, benefit communication and education for employees supported by state of the art professional, licensed call center. The flexible technology platform also allows for multi-year strategy — beginning with core benefits administration and the option to migrate to full private exchange and defined contribution approach without disruption.

hCentive Expands Partnerships with Insurers, Administrators to Participate in Private Exchange hCentive has announced that the company has added health and ancillary insurance carriers and benefits administrators to its WebInsure™ Benefits marketplace. WebInsure™ Benefits is a cloud-based marketplace platform that simplifies administration for brokers, offers an intuitive online experience for individuals and control for employers to shop, enroll and manage health insurance, ancillary benefits and consumer-directed accounts. New insurance carriers and benefits administrators providing medical and ancillary benefits include: Discovery Benefits, Kaiser Foundation Health Plan of the Mid-Atlantic States, Reliance Standard and WageWorks.

Private Exchange GoHealth Plays Significant Role During Tax Special Enrollment Period GoHealth, the nation’s leading private online exchange for individuals and families to shop and compare health insurance plans, announced its enrollment results from the tax Special Enrollment Period (SEP), which occurred from March 15 to April 30. This SEP gave people who were unaware of the tax penalty for going without health coverage the opportunity to sign up for major medical health insurance outside of the national Open Enrollment Period. During this time, Chicagobased GoHealth proved to be a primary enrollment channel for eligible shoppers. CMS announced that approximately 147,000 consumers signed up for health insurance through HealthCare. gov during the tax SEP. Of those consumers, roughly one-in-seven sign-ups were processed through GoHealth’s exchange platform and network of licensed insurance agents. As a government-approved enrollment partner of CMS, GoHealth serves as an additional free resource that connects consumers with insurance subsidies and health plans offered on HealthCare.gov.

Maestro Health Acquires Group Associates Maestro Health, a leading benefits administration and exchange provider, announced that they have acquired Group Associates, Inc., a Michigan-based benefit administration company. Group Associates, which recently unveiled its unique, automated Affordable 6

Third Quarter 2015 I www.TheIHCC.com I HealthCare Exchange Solutions™

Care Act reporting technology, will maintain its current Detroit location and leadership team. Their automated ACA compliance technology will immediately become an integral part of the “AllIn” Maestro Health offering. January 1, 2016 marks the first year employers are required to provide reports to the IRS and statements to employees as part of the Affordable Care Act legislation. The law, which carries a financial penalty for employers that do not comply, has extensive tracking and reporting requirements that many brokers and employers are struggling to successfully satisfy.

Community Health Choice Goes Live with Softheon Marketplace Connector Cloud in Under 90 Days Softheon, a proven leader in health insurance marketplace integration and business operation, announced that Community Health Choice, Texas’ ninth largest health plan, serving over 300,000 lives, has fully implemented its Marketplace Connector Cloud (MC2) as its software platform to integrate its comprehensive plan offerings to the Federally-Facilitated Marketplace. Community Health Choice is a not-for-profit managed care plan and a member of the Association of Community Affiliated Plans (ACAP). Following this implementation, Softheon MC2 Plan Catalog Management, Eligibility & Enrollment, Electronic Direct Enrollment Consumer Portal and Premium Billing solutions have been utilized by Community Health Choice — leveraging its core administrative system. The focus of this partnership will enhance Community Health Choice’s multi-channel distribution and outreach channels, while cultivating the user experience of its members and brokers.

Towers Watson Names Sherri Bockhorst Managing Director, Group Exchange Towers Watson announced that it has hired Sherri Bockhorst as a managing director in its group exchange business. In this role, Sherri will help continue to drive innovation and outcomes in the private exchange market. Before rejoining Towers Watson, Bockhorst led the launch of the RightOpt® private exchange solution offered by Buck Consultants at Xerox. At Buck, Bockhorst oversaw product strategy, operations, vendor/partner relations and sales and marketing for the solution, serving both active and retiree populations.

Benefitfocus Partners with HealthTap to Add Virtual Care to Its New Voluntary Benefits Store Benefitfocus has partnered with HealthTap to make it easier for employers, carriers, brokers and consumers to add virtual health care services to their benefits packages. BENEFITFOCUS® Platform users will be able to select HealthTap on the same platform that they use to enroll in their traditional benefits via a Benefitfocus voluntary benefit exchange and consultation solution — Benefitstore. Benefitfocus platform users will be able to select HealthTap at a preferred rate along with a selection of curated voluntary insurance and benefits services such as critical illness, hospital indemnity, accident, legal, permanent life, pet, auto, home and more.

PlanSource Adds MetLife to its Distribution Platform for Employee Benefits PlanSource, a leading provider of cloud-based health exchange and benefits engagement technology, announced that it has added MetLife®, a global provider of life insurance, annuities, employee

benefits and asset management, to its distribution platform for employee benefits. PlanSource now distributes MetLife’s portfolio of products through its highly-configurable benefits engagement system, which can be administered by employers or configured as a public or private exchange using PlanSource OneMarket. Launched in 2014, PlanSource OneMarket provides standard benefit products and services from leading insurance companies in a marketplace where employees can shop for benefits in the same consumerfriendly way they shop for other products online. Through the PlanSource platform, consumers have access to 11 MetLife product lines, including traditional benefits such as basic and supplemental life, dental and vision, as well as ancillary benefits such as accident, hospital indemnity, and critical illness.

Industry Leaders Form Coalition to Drive a Productive Path Forward in Private Exchanges The Private Exchange Coalition (PEC) has announced its formation to help guide the rapidly growing private exchange industry. The PEC will serve as a forum for those in the industry to share ideas and best practices and increase awareness of the powerful ways in which private exchanges improve the selection, administration and use of employee benefits — while empowering consumers at every point in the decision-making process. Against the backdrop of health reform — and with shared goals to eliminate waste, provide greater transparency and increase accessibility to health insurance and other benefits — the PEC aims to help establish private exchanges as a long-term solution for enabling consumers to easily evaluate and select employee benefits that best meet their health care, economic and lifestyle needs.

Quadrant 4 System Corporation Announces Its Breakthrough Online Exchange Solution, QHIX Hybrid Exchange Quadrant 4 System Corporation recently announced its breakthrough online exchange solution, QHIX Hybrid Exchange™. The QHIX Hybrid Exchange brings together employers, benefits products, associates/team members, service providers, payroll and banking solutions into a single place. It is a robust administrative ecosystem providing sophisticated benefits administration where employers, employees, brokers and insurance companies come together in an online environment to buy, sell and manage insurance and other benefits-related products. The QHIX Hybrid Exchange™ is unique because it combines the functionality to service the largest group exchanges in addition to serving the exchange needs of a single individual.

HPOne Launches Next-Generation Multi-Carrier Exchange Solution for Retirees HPOne, one of the nation’s leading private exchanges for retirees and individuals, has launched the ClearChoice Exchange, a new health care exchange solution created for employers seeking to manage retiree health care costs while enhancing the flexibility, choice and value provided to their retirees. The ClearChoice Exchange provides a full-service solution for employers looking to transition from a traditional group insurance plan for retirees to a defined contribution approach. The ClearChoice Exchange offers plans from multiple carriers for pre-65 retirees; individual Medicare Advantage plans

from multiple carriers; and the UnitedHealthcare Group Medicare Advantage Preferred Provider Organization (PPO) plan.

Hager Strategic Partners with The Terry Group to Offer a Robust Solution for Private Exchange Evaluation Hager Strategic, a Washington D.C.-based benefits, HR & payroll administration consulting firm, recently announced its partnership with the Terry Group, a Chicago-based actuarial firm. With this new partnership, Hager significantly bolsters its services in the private health care exchange evaluation market. Employers seeking advice in assessing exchange provider solutions can now expect independent actuarially-based analysis and vetting of competing vendor proposals. Until now, the firms in the best position to perform actuarial analysis of exchange proposals were the same firms that also offered exchange solutions of their own. Hager Strategic and the Terry Group have focused on developing the necessary actuarial tools and models to facilitate relevant exchange proposal evaluations. The combined Hager Strategic-Terry Group exchange team has already been engaged by a number of clients. In addition, the Hager-Terry team has been interacting with key health care exchange providers so that RFPs can be shaped to accurately reflect the critical elements of each provider’s exchange approach, while also facilitating relevant comparisons from one approach to another.

bswift, First Niagara Benefits Consulting and LVBCH Partner to Provide Private Exchange Services The Lehigh Valley Business Coalition on Healthcare (LVBCH) recently announced its selection of bswift’s technology to power a private exchange for its member employers. Concurrently, bswift announced that First Niagara Benefits Consulting (FNBC), a division of First Niagara Risk Management and subsidiary of First Niagara Bank, N.A., will manage the LVBCH private exchange. The LVBCH private exchange is designed to assist employers with managing costs more effectively. It also offers competitive benefit options for employees by leveraging existing LVBCH products and the robust technology that bswift has developed over the past 15 years.

Deloitte Report: Health Insurance Exchanges May Spark Consumerism People who obtain health insurance through the public exchanges (HIX) show signs of acting more like savvy shoppers versus passive patients when engaging the health system, according to the Deloitte report, “Public Health Exchanges — Opening the Door for a New Generation of Engaged Health Care Consumers.” The study compared people who obtained insurance through an exchange with those who have it through their employer or Medicare or Medicaid. It found that HIX enrollees better understand their benefits and costs and are more likely to compare providers and services on price and, to some extent, quality. They also are willing to switch plans, thrusting carriers into a new arena of having to continually win over this segment based on price, product and service. The report found that 51 percent of the HIX individuals surveyed used an online tool to compare and negotiate prices among doctors and hospitals, versus 45 percent for those with employer-based coverage and 36 percent for those on Medicare.

HealthCare Exchange Solutions™ I www.TheIHCC.com I Third Quarter 2015

Visit us at Booth #124, and let’s talk about how to create your highly effective online marketplace! And be sure to join us for a panel discussion on the topic of “Understanding Private Exchange Models and Platform Options.”

connectu.re/go-on-ramp

STATS & DATA BY LANCE HOOD SENIOR DIRECTOR OF MARKETING ARRAY HEALTH

Private Health Insurance Exchanges Demonstrate Their Business Value

umerous studies over the past couple of years have documented the growth in employer and insurer adoption of private exchanges. Accenture and Deloitte have both predicted that private exchange enrollment could reach 40 million by 2018. What these studies haven’t demonstrated, however, are the tangible business benefits realized by insurers through the implementation of private exchanges. What pain points are being solved through exchanges? What competitive advantages do exchanges create for insurers? What barriers do they need to overcome in order to realize these advantages? Health Check: Examining the Business Impact of Private Health Insurance Exchanges, a May 2015 study of 100 health insurance industry stakeholders, sought to explore these questions and others facing a more mature private exchange market. According to the study, insurers are seeing a notable reduction in their administrative burden as well as an increase in their market share as a result of operating a private exchange. While insurer-led private exchanges have been touted as solutions that offer flexible options for employees and cost control for employers, the business case for these exchanges is less often discussed. But the business case is evident in the data – more than half (52 percent) of survey respondents reported seeing a reduction in administrative costs, and 48 percent have increased their market share. Reduced administrative costs can be significant, as they can offer extensive cost savings to employers, brokers and insurers by eliminating paper-based waste, errors and process inefficiencies. The recognition of these substantial business benefits is not limited to those currently operating private exchanges. Of those that plan to offer single-insurer private exchanges, 55 percent expect that a reduction in administrative costs will be among the benefits, followed closely by increased revenue (45 percent) and increased market share (43 percent). If you currently use a single-insurer private exchange to sell to groups and individuals, what areas of your business have been most impacted by the implementation of the exchange? If you are planning to use a single-insurer private exchange to sell to groups and individuals, what value do you expect to realize through the implementation of the exchange?

% of respondents 60

52%

55%

45%

48% 43%

32% 30

19% 12%

Increased revenue

Improved margins

Reduced administrative costs

Increased market share

By January 2016, what percentage of private exchanges (single and multi-insurer) will offer a robust and comprehensive set of ancillary products such as life, critical illness, accident, pet insurance, etc.?

% of private exchanges

76-100 51-75

7% 14%

31%

26-50 0-25 0

47% 50

As private exchange adoption increases, ancillary products represent one of the biggest growth opportunities for insurers. The data unveiled an interesting paradox — most notably, that ancillary products are seen as key to a compelling consumer experience, but exchanges are slow to adopt beyond only the most common products. Anecdotal evidence suggests that this is because the partnering and set-up burden for ancillary products is a delaying some insurers. Yet, 59 percent of respondents believe that the availability of ancillary products will lead to an improved consumer shopping and enrollment experience on private exchanges. Given that ancillary offerings are increasingly considered an important component of an employee’s overall compensation package, insurers are missing an opportunity to create a compelling consumer experience by not extending their offering beyond traditional product sets fast enough to offerings like life, critical illness, accident and pet insurance. Increasingly, insurers are looking to their private exchange vendors to bring a library of ancillary partners with their technology solution. Looking ahead to the market changes, and with the “Cadillac” tax set to begin in 2018, private exchanges hold the promise to relieve a significant administrative burden for insurers and employers — particularly if they can capitalize on the ancillary opportunity — and further empower consumers to be the ultimate stewards of their care. In fact, the data shows that private exchanges are well on their way to becoming the de facto model for employer-sponsored health insurance, with nearly three-quarters of respondents indicating that the majority of health insurers will offer a private insurer-led exchange by the end of 2017, if not sooner, and almost half of respondents (44 percent) indicating that the majority of employers will offer employer-sponsored health benefits via a private exchange within that same time frame. Clearly, today’s health insurance landscape is more complex than ever. Changes triggered by the Affordable Care Act and increasing health care costs, coupled with the emergence of an increasingly empowered and engaged health care consumer, have created a “perfect storm” of factors leading to the widespread growth of private exchanges. For the first time, the industry now has a data set that clearly shows the extent to which private exchanges enable insurers to win and retain business by controlling costs for employers and providing greater choice, control and convenience for consumers.

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PERSPECTIVES

Private Exchanges Leading to Both a “Buy-down” and a “Buy-up” Effect BY ROB HARKINS » VICE PRESIDENT OF PRIVATE EXCHANGES AND JON TREVISAN » SENIOR VICE PRESIDENT AND DIRECTOR OF PLACEMENT » WILLIS HUMAN CAPITAL PRACTICE

ne interesting result of the advent of private exchange technology combined with a defined contribution is that when individuals are given a) money to spend on benefit purchases and b) a shopping experience that they can navigate, they behave like consumers. In this environment, they typically purchase less medical coverage (sometimes called the “buy-down” effect), leaving money available to purchase other benefit options (the “buy-up” of voluntary benefits). In effect, their benefit choices change, reflecting a true consumerminded benefit model. What’s prompting this surprising turn? Currently, many employers choose medical plans that they believe will accommodate the needs of the greatest number of members. In so doing, they often select a benefit plan that meets the needs of those members who utilize the plan more than most. Additionally, the traditional benefits culture has fostered an environment where more insurance is better, even if a cost benefit analysis indicates otherwise. The end result is that many individuals are over-insured. However, this concept is becoming increasingly challenged, supplanted by the idea that one can be adequately insured at a lower (in fact, correct) level of benefits. A private exchange is the ideal solution to help people navigate choices, evaluate options and “right-size” their benefits. When people are provided money to spend on benefits and multiple plan options exist — in conjunction with a robust decision-support tool that helps them evaluate choices — they behave differently. By becoming more educated benefits consumers, people behave more efficiently and buy only those plans that they need.

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Private exchange decision support tools provide individuals with a recommendation that is customized to their personal needs. Armed with a recommendation that presents personalized financial and benefit options, many people have the confidence to make decisions that best suit their needs. In most cases, they purchase a lower cost medical plan than what their employer previously offered in the traditional one-size-fits-all approach. As a result of this change in buying habits and the “buy-down” effect realized for the reasons previously identified, the Willis Private Exchange experience has demonstrated savings of almost $700 per employee per year. Coupled with the “buy-down” of medical insurance, we are finding an increase in the number and volume of voluntary benefits purchased by employees in a private exchange. Employees are buying a greater number of voluntary benefits to supplement the traditional lines of insurance that have historically been offered; they’re also buying more voluntary benefits when given additional options. Based on an analysis of the Willis book of business available, we found that voluntary benefit purchasing more than doubled when employees purchased in a private exchange. This behavior could be attributed to employees taking a more consumer-minded approach when presented with an increased number of medical benefit plans and decision support technology that shows them in real dollars and cents how much each benefit selection costs. When employees act as rational consumers, they buy what is most important to them. And as purchasing habits reveal, employees have determined

that voluntary benefits are an important component of their comprehensive employee benefits package. Private exchanges offer more choice, with an increased number of plan options to choose from and a greater suite of voluntary products to buy. Expanded choice is important because we now have four generations in the workforce. In addition, many baby boomers are working past age 65. Therefore, buyer’s needs are becoming more varied and voluntary benefits are increasingly used to meet the varied needs of a more diverse and sophisticated workforce. Most significantly, as medical plan deductibles and out-of-pocket levels continue to increase, the use of voluntary benefits — which can help offset the employee’s deductibles and coinsurance responsibility — can be a cost-effective way to protect against the financial impact of a costly medical incident. Private exchanges, by their very design, help consumers realize the importance that voluntary plans can play in getting a comprehensive benefits program that is best suited to their needs. And that’s a good thing. With rising medical costs trends remaining unchecked, the inherent structure of a private exchange can actually assist in optimizing consumer behavior in such a way that appropriate medical coverages are purchased (the “buy-down” effect), accompanied by complementary, lower cost, voluntary benefits (the “buy-up” effect). This model can actually assist in mitigating the financial risk for the individual, while lowering the overall cost to the employer. We believe this is a winwin scenario that truly ushers in the next stage of consumerism.

PERSPECTIVES

Who Needs a Private Exchange Anyway? BY FRANK B. MENGERT » DIRECTOR OF EXCHANGE TECHNOLOGY » EBENEFIT MARKETPLACE

hances are by now, the average broker, consultant or employer has evaluated four or five different flavors of “private exchanges” in the past 12 months. As we enter into the fourth quarter of 2015 one thing is for certain: there is still confusion about what a private exchange is and how employers can benefit from one.

Five years ago, a “pure play” private exchange came onto the scene and was sweeping the nation. Seemed like everyone wanted to join in. Fast forward to today, that organization was gobbled up by a national firm, and quite frankly we haven’t heard their name in quite some time. Not only is this because of the competition within the market, but it

Employers are shifting from paper-based enrollment into some form of benefits administration. Maybe they want multiple plan choice or maybe they want defined contribution. Most likely they just want to automate some of the manual processes and when the time comes to adopt defined contribution, they can flip a switch and turn it on.

Chances are by now, the average broker, consultant or employer has evaluated four or five different flavors of “private exchanges” in the past 12 months. As we enter into the fourth quarter of 2015 one thing is for certain: there is still confusion about what a private exchange is and how employers can benefit from one. As a national technology partner with bswift, I have the luxury of speaking with brokers of all types — national players as well as the regional and local firms. The influx of RFPs has risen dramatically; this means that not only brokers — but employers as well — are starting to take a serious look at the solutions on the market, how they differ and what the plus side is to adopting this technology. There are many times I know our technology is not a proper fit for a group. The good thing is that with all of the available technologies on the market, brokers and consultants have a variety of options to offer up. The question still is... do I need a private exchange?

is also due to the nature that not every employer needs a true private exchange. Take bswift for example. It’s basically a storefront. Employers can “stock the shelves” with any product they wish. The technology isn’t tied to any carrier, and there is flexibility for employers to move from carrier to carrier without fearing they will lose their platform. At the same time, they still get the benefits of defined contribution, decision support, multiple plan options, employee self-service and ACA compliance. Competition is good for the market. Options are good for employers. Private exchanges will continue to grow… however you are defining it.

Bottom line is that whatever you are calling your private exchange, let’s hope it is solving a problem — whether that is better plan choice, multiple funding options, electronic enrollment or ACA compliance. The next few years will see continued growth with these platforms: that is certain. A seasoned information technology executive with over two dozen industry-recognized certifications and a B.S. in Computer Science, Frank is the director of exchange technology for ebenefit Marketplace. He is focused on partnerships with national, regional and local distribution channels. Under his leadership, ebenefit has grown nationally, providing organizations across the United States with the tools and resources they need to succeed in this new world of employee benefits.

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PERSPECTIVES

Midsummer Reflections on a Favorite Subject… Exchanges BY MIKE SMITH » ASSISTANT VICE PRESIDENT, DIRECTOR, EXCHANGE SOLUTIONS » LOCKTON BENEFIT GROUP

e just returned from our annual family trip to the beach. Lots of sun, surf, sand, seafood... and reflection.

It’s been about a year and a half since I joined Lockton as director of the Exchange Solutions Practice. In that time, some of the assumptions we (and by “we”, I mean all of us in this industry) had about the private exchange space have missed the mark, some are on point and others are emerging as developing trends. Predictions miss the mark Industry-wide, the biggest “miss” would be our collective predictions on exchange adoption rates for 2014, 2015 and 2016. There were some very aggressive bets out there — one analyst stated there would be 22 million employees enrolled by 2017, while another predicted somewhere between eight and 18 million. Others were off by even more than that. Much has been written about why these figures have not lived up to the hype. We could point to the newness of the market, employers searching for financial, administrative or engagement value, corporate economic strength and the focus on talent retention over cost management, easing of medical inflation, increasing attention to employee wellbeing and, lastly, implementation focus on Affordable Care Act (ACA) reporting requirements and tools. Still, growth is coming But the underlying drivers as to why employers want to consider exchanges — managing costs, leveraging technologies, expanding choice, driving employee engagement, administering HR/benefits efficiently and in compliance – remain in place and will grow in importance over the coming years.

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Why do I think so? First, we are undergoing a massive shift of workforce demographics. Baby boomers are retiring, and millennials are starting and advancing in their careers. Employers are focusing on strategies that meet and exceed the demands of these new entrants. Technology expansion We all know millennials have grown up during the largest technological expansion (i.e. the Internet) and have come to expect services and products served up to them through technology. We estimate that 50 percent of employers still enroll, track and report their benefit programs on paper or through spreadsheets. Can you imagine the impression a 20-something new hire has of his or her employer when they are handed paperwork for payroll or benefits enrollment? “Paper, what the heck is this?” So there is — and will continue to be — a huge emphasis on technology expansion to serve the workforce over the next 10 years, and guess what is fueling this expansion? You guessed it, capital. Capital counts too USA Today Tech recently quoted Ahmed Albati, founder and CEO of Medullan, a digital health innovation lab in Boston, saying that more than $2 billion was invested in digital health startups in 2014. In the same piece, McKinsey said it has found “more than 2,000 startups with the key words ‘digital health’ and ‘new health care technologies.’” These amounts are on top of the current $3.8 trillion in U.S. health care spending. In the exchange space, let’s consider the $400 million that Aetna spent on bswift, and Towers Watson spending in excess of $775 million for its acquisitions of ExtendHealth, Liazon and Acclaris — in addition to its new $8.7 billion merger deal with

former rival Willis Group Holdings. There are more examples, but you get the point. Government regulation spurs market developments Another element pointing toward exchange expansion is government regulation, namely the ACA. Now that the Supreme Court has ruled in favor of the federal exchanges in King v. Burwell, it’s safe to say the ACA is here to stay. Government regulation (or deregulation) always spurs market developments to meet these requirements. Think about the expansion of the health care system, including hospitals, technologies, providers, etc., in the 47 years since the passage of Medicare. What Medicare and then Medicaid did to the post-65 and lower income/limited resource populations will increase with the expansion of health care to the pre-65/ working populations. Employers are now focused on making at least good faith efforts to comply with ACA reporting requirements, as well as embracing strategies to avoid payment of excise taxes. The excise tax conversation will be robust and morph into the 2016 election cycle, challenging everything from the current tax code to repealing the excise tax. But given our federal budget deficits and that the recent trade bill that doubled the penalties for ACA reporting noncompliance, I don’t think excise tax repeal is in the cards. This will fuel the exchange conversation, since a marketplace filled with choice is an efficient method of costshifting. To read the rest of Mike’s reflections on the private exchange market, visit The Private Exchange Blog at PrivateHealthCareEXCHANGES.com.

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While the “one-size-fits-all” mantra of benefits continues to dissipate, carrier-owned exchange solutions will be in the advantageous position of offering plan designs, products and networks to best accommodate the changing demands of the market.

The New Enrollment Experience Traditional enrollment scenarios often leave consumers on their own — or with help of HR administrators — to select benefits which can be both difficult and time-consuming. Blue Directions engages members before enrollment begins and throughout the enrollment process to help members make the right decisions for them and their family. Engagement includes: • Pre-Enrollment Education – The Blue Directions Member Site is available prior to enrollment, so consumers can see the plans available, how they compare, the enrollment experience and how to take the next steps. • Online Decision Support – Once enrollment begins, members can access an online survey that matches them with plans based on coverage needs, risk adversity and their budget. The simple survey creates a personalized profile to find “great match” plans. • Advisor Call Center – The Blue Directions Advisor Line is staffed by licensed agents who are available for enrollment questions, benefit inquiries or to consumers who prefer to enroll over the phone. • Price Transparency – Members will understand exactly how much their employer is contributing toward coverage and exactly how much they will pay out of pocket. Contributions vary on a plan-by-plan basis.

Moving to a High-Performing Environment As members have enrolled through Blue Directions, we have seen a large segment of members migrate into consumer-driven health plans — plans with typically higher deductibles. Nearly 50 percent of members have elected CDHPs, with 74 percent of those members also opening a tax-advantaged savings account during enrollment4. While an increase in CDHP enrollment is encouraging, we also recognize the importance of providing members with support to ensure that they make good benefit decisions throughout the year and not just during enrollment. HCSC leverages our market-leading experience to help move members into a high-performing environment where they can both maximize their benefits and reduce their total costs. Blue Edge, our portfolio of CDHPs, have demonstrated true behavioral change in consumer spend after switching from a traditional plan. The most recent analysis of BCBS claims experience show reduction in total spending and an increase in preventive services for members switching to these plans. In the first year following a switch from a more traditional plan, Blue Edge plans reduced per member per year (PMPY) spend by 9.7 percent. And in the subsequent three year period, they reduced PMPY by 11.8 percent overall, accounting for an average of $443 in cost reduction5. While lowering spend elsewhere, members showed a tendency to maintain or improve their use of preventive care services and routine visits. Over three years, Blue Edge members showed a 14 percent reduction in professional services, 5.1 percent reduction in outpatient services and a 23.5 percent reduction of inpatient services in terms of PMPY. This cost reduction has been accomplished by providing Blue Edge members with tools and services to empower them to make better health care decisions. Blue Directions incorporates these programs to ensure the members have the resources they need to be good health care consumers and healthy employees. These programs are traditionally buy-up options that have been incorporated into the Blue Directions program because of

their demonstrated return on investment. For 2016, members will have access to: • Blue Care Connection with Primary Nurse – Enhanced medical management program that leverages a multi-disciplinary team to create a member-centered advocacy program. Primary Nurse realized $200 average cost avoidance PMPY6. • Integrated Provider Finder – An interactive network tool that compares providers by location, cost, quality, member reviews and wait time through data based on 20,000+ health care facilities and 400,000+ professional providers in the BCBS network7. • Benefits Value Advisor – Cost transparency service that provides comprehensive per incident pricing (from admission to discharge) and includes over 300 procedures. Costs are based on claims data from 30 million members and 958,400 providers8. Awareness campaigns based around the availability and advantages of these programs will be communicated to Blue Directions throughout the benefit year. These programs and communications are not limited to Blue Edge plans either as they are available to all members enrolled through Blue Directions. Outside of the tools and programs we have highlighted, Blue Directions maintains the distinct advantage of being Blue – with the ability to leverage our strong local networks and our partnerships with the provider community. The next generation of Blue Directions will be based around valuebased care, transparency tools and high-performing networks that will continue to address the rising costs of health care. Network strength and network experience will be pivotal in controlling costs while advancing our member-centric approach.

Embracing the New Experience Private exchange technology has increased transparency during enrollment and increased choices for members, but it is the integration of transparency tools, carrier-driven medical management programs and strategic product offerings that will ultimately mitigate the true costs of health care. Blue Directions offers an exciting opportunity to create a comprehensive experience for health care consumerism by combining the value of BCBS with 21st century technology — delivering quality care through an individual, consumer and member-centric lens. Blue Directions for Large Business is available for employers with 101+ employees in Illinois, Montana, New Mexico, Oklahoma and Texas. Learn more at bcbsil.com/blue-directions. Private Exchange Evaluation Collaborative (PPEC): Private Exchange Employer Survey Findings. December 2014. 2 Accenture: “Private Health Insurance Exchange Enrollment Doubled from 2014 to 2015 According to Accenture Analysis” April 2015. 3 HCSC Internal Analysis: 2015 Blue Directions book-of-business enrollment statistics 4 HCSC Internal Analysis: 2015 Blue Directions book-of-business enrollment statistics 5 HCSC Internal Analysis: 2013 Internal Study for consumer-driven health plans 6 HCSC Internal Analysis: 2014 BCBS National Account Case Study of 8,200 members over two year period (2012-2013). 7 BlueCard Program data for all Blue Cross and Blue Shield plans 8 HCSC Internal Analysis: Based on HCSC 2013 book-of-business 1

HealthCare Exchange Solutions™ I www.TheIHCC.com I Third Quarter 2015

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