HealthCare Exchange Solutions - 2015 4th Quarter Issue by The Institute for HealthCare Consumerism

Fourth Quarter 2015

Exchange

About Innovative Health and Benefit Marketplaces

Why Exchanges are Evolutionary, Not Revolutionary Health Care Exchanges are Changing the World of Benefits Private Exchange Tailwind 2016: The â&#x20AC;&#x153;Cadillacâ&#x20AC;? Tax

The Official Magazine of

Exchange www.theihcc.com

INSIDE FEATURE 14 The Evolution of Private Exchanges

DEPARTMENTS

“We hold these truths to be self-evident” … “Liberté!” … “Egalité”… “Fraternité ou La Mort” … “Iskra!” Revolutions — and words of revolution like those above from American, French and Russian history, respectively — are often defined or marked by a sudden and pervasive change to society. When I joined Lockton a few years back as director of our Exchange Solutions practice, the headlines in employee benefit publications screamed “Private Exchanges Could Trigger Health Benefits Revolution” or “Meet America’s Private Health Care Revolution” or “A Health Care Revolution on Private Exchanges.” Technology firms, carriers, brokers and consultants were all rapidly building out exchange products and services, as well as creating alliances to serve this market. At the same time, enrollment projections from many reputable analysts claimed that between 12 and 20 million Americans would receive benefits through an exchange by 2016. When I visited with our associates, there was a large demand to learn about this emerging market. Clients also were bombarded with sales and marketing efforts trying to stoke the flames of private exchanges.

Private Exchange Tailwind 2016: The “Cadillac” Tax By using a private exchange in 2016 for 2017 effective dates, employers can wade their employers into these new waters. The private exchange model can educate users on the importance of choosing the right plan. It can give them tools to evaluate options and pick the one that suits their needs. It can introduce the idea of defined contribution. Defined contribution is one keyPERSPECTIVES strategy to avoid the “Cadillac” tax! By Jeff Yaniga, Chief Revenue Officer, Maestro Health

PERSPECTIVES 10 What Small Employers Need to Know about the Affordable Care Act 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 George Tzinas, Chief Experience Officer, Benefitalign

Revolution was in the air. By Mike Smith, AVP and Director of Exchange Solutions, Lockton Benefit

11 Health Care Exchanges are Changing the World of Benefits Even More than Parachute Pants Changed the World of Fashion In the 1980s, a huge shift occurred in the way retirement plans were funded. Traditional, company-funded pension plans began to be replaced by self-funded 401(k) plans, which were cost effective for employers and gave employees unprecedented freedom to invest for their retirement. The benefits world is now in the midst of a similar change, stemming from the rising popularity of private health care exchanges using defined contribution benefit models. By Scott Carver, President, PlanSource

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. t t t t

MassMutual Launches Integrated Private Exchange WEX Acquires Benaissance Mercer Marketplace™ Continues Strong Growth Blue Cross Blue Shield of Arizona Selects Maestro Health

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PUBLISHER

Exchange www.theihcc.com VOLUME 2 NO. 6 | FOURTH QUARTER 2015

Benefits Evolving Toward 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

In both of this supplement’s features, our contributors — Mike Smith at Lockton and Scott Carver at PlanSource, respectively — look at the market trends that have led to the advent of private exchanges. Revolution or evolution, Mike Smith asks? The two contributors — both veterans of the health care space and now recognized experts in the private exchange market — come to the conclusion that private exchanges are much more so an evolution. As Smith writes, exchanges have developed as employers continue to “look for ways to control costs, provide additional benefit choice, engage with their workforce more effectively, find better and cheaper ways to administer benefits and achieve compliance.” In a nutshell, the aims of health care consumerism.

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

Eric Bruce ebruce@theihcc.com ART DIRECTOR

In our coverage of private exchanges over the last several years, our point-of-view has aligned very closely with those of Smith and Carver. As John Young has often said, private exchanges are a catalyst for consumerism; at the same time, it’s clear that path carved out by health care consumerism over the past decade has been a catalyst to the development of private exchanges. As we enter a new year, everyone in employer-sponsored health care and benefits will be paying close attention to the adoption rate of private exchanges. While some would perhaps argue that the adoption curve has been less steep than expected, employers will continue to move to exchanges as a natural progression of the consumerism track they have been on for years. It will be interesting to see how fast this shift happens, and this will depend on several factors. Coming up in February, we’ll attempt to address some of what’s working and what’s not with private exchanges at our first event of 2016 — the second annual Private Exchange FORUM in Dallas. Following up on the sold-out event last March in Dallas, over 500 attendees will gather to take a hard look at the truths and myths of the current private exchange landscape.

Kellie Frissell 404.671.9551 ext. 107 · kfrissell@fieldmedia.com CHAIRMAN OF IHC ADVISORY BOARD

Ronald E. Bachman, CEO, Healthcare Visions EDITORIAL ADVISORY BOARD

Kim Adler, Allstate; Diana Andersen, Zions Bancorporation; Bill Bennett; Doug Bulleit, DCS Health; Jon Comola, Wye River Group; John Hickman, Alston+Bird LLP; Tony Holmes, Mercer Health & Benefits; Marc Kutter, Aflac; Sanders McConnell, TSYS Healthcare; Roy Ramthun, HSA Consulting Services LLC; John Young, Consumerdriven LLC WEBMASTER

Tim Hemendinger timh@fieldmedia.com DIRECTOR OF CONFERENCE SPONSORSHIP/ CORPORATE MEMBERSHIP/REPRINTS

Rogers Beasley 404.671.9551 ext 109 · rbeasley@fieldmedia.com ACCOUNT MANAGERS

Michelle Gatehouse 404.405.3007 • mgatehouse@theihcc.com

From all of us at The Institute for HealthCare Consumerism, happy holidays, and we hope to see you in Dallas — or our other three 2016 conferences. Here’s to a happy, healthy and productive 2016!

Ted Arvan 678.296.1906 • tarvan@theihcc.com PARTNERS/ALLIANCES

Joni Lipson 800.546.3750 · jlipson@fieldmedia.com

Sincerely,

Doug Field CEO/Publisher dfield@fieldmedia.com

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 Blue Cross Blue Shield of Arizona Selects Maestro Health as Private Exchange Solution Provider Maestro Health, a leading all-in employee health and benefits company, announced that its shopping and enrollment platform, maestroEDGE, has been selected by Blue Cross Blue Shield of Arizona to serve as its exclusive private exchange solution for employers. Providing health insurance products, services or networks to more than 1.4 million customers, BCBSAZ gives consumers the option of selecting from hundreds of plan designs with 40 different attributes per design. Given the sheer volume of options and number of variables to track, monitor and administer, BCBSAZ saw an opportunity to modernize its benefits management technology to provide employer groups with greater clarity and visibility into the status of their benefits applications, billing, collection, reimbursement and operational processes — beyond annual open enrollment.

MassMutual Launches Integrated Private Exchange with Retirement Savings, Health Care and More Massachusetts Mutual Life Insurance Company is launching BeneClick!, a unique, integrated exchange featuring a guidance tool that helps employees prioritize their retirement savings, health care and insurance protection benefits based on their individual life stages and then take action. The new exchange, an online marketplace for people to select their employer-sponsored benefits, is powered by Maxwell Health’s benefits technology platform. Maxwell Health built the first “Health as a Service” platform, an operating system for benefits that engages employees, incentivizes a holistic view of health and provides a centralized place to access health and benefits services.

Softheon Launches Welltheos, A Private Exchange with 32,158 Plans from 249 Carriers Softheon™, a proven leader in health insurance marketplace integration and certified Web Broker Entity, announced its private exchange platform, Welltheos. Designed to provide relevant health plan information, while reducing the complexity of purchasing coverage through the Marketplace, Welltheos is set to enroll tax subsidy-eligible residents in the 37 states where HealthCare.gov is utilized. Welltheos serves as an Enrollment channel for subsidy eligible consumers into Qualified Health Plans (QHPs), offering access to 32,158 brand name health insurance products, from 249 health insurance issuers participating on and off the Federally Facilitated Marketplace. The platform hosts a variety of consumer decision support tools, including real-time eligibility determinations and subsidy estimations. This is achieved through accessing the federal data hub, CMS, IRS and other federal agencies to verify applicants’ identity and income.

and payment acceptance practices through two industry-leading SaaS solutions. This includes ExchangePoint , which addresses the complex financial management demands of public and private health insurance exchanges for employers and individuals as well as COBRApoint®, which addresses complex financial management, benefits administration and payment processing for individual subscribers.

Mercer Marketplace™ Continues Strong Growth with 96 Percent Participant Satisfaction Mercer recently announced that its Mercer Marketplace private benefits exchange continues to grow in both individual participants and numbers of clients. The exchange now serves more than 300 companies with 703,000 eligible employees and retirees, with an anticipated 1.5 million lives. More than 200 companies offer Mercer Marketplace to their active employees for health care and additional benefits. The Mercer Marketplace medical plan cost savings have proven to be sustainable. Medical plan savings in the first year can be as much as 15 percent. Second year savings for the initial group of Mercer Marketplace clients demonstrate significant reductions in medical plan cost trend, with just a 1.5 percent medical cost average increase in year two. This is well below the 4.6 percent cost increase experienced by companies according to the annual Mercer National Survey of Employer-Sponsored Health Plans.

Quadrant 4 Announced as Newest Member of The Private Exchange Coalition Quadrant 4 announced it has joined the The Private Exchange Coalition as a new member. PEC is the premier industry association for organizations affiliated with private exchanges and includes the following firms: Connecture, Array Health, Bloom Health, ConnectedHealth, Softheon and Leavitt Partners. The Private Exchange Coalition was originally formed by five industry-leading private exchange technology vendors as a means to promote shared industry standards, best practices and increase awareness of the powerful ways private exchanges improve the selection, administration and use of employee benefits.

New Aite Group Report Finds Private Exchanges Ready for Liftoff The stage is set for a sharp increase in the number of U.S. employees who enroll in health insurance on third-party private exchanges. Brokers sit at the forefront of the charge as a result of competitive pressures and the “Cadillac” tax, but there is another reason — the technology works. As brokers use the tax and the technology to increase their standing as an employer’s trusted advisor, what segments and approaches are they eyeing to fuel this ascent? This report projects total private exchange enrollment, examines the market factors fostering or inhibiting enrollment growth and outlines key competitive trends.

WEX Inc. Announces Definitive Agreement to Acquire Benaissance

hCentive Implements Arkansas Health Insurance Marketplace for Small Businesses

WEX Inc., a leading provider of corporate payment solutions, announced it has entered into a definitive agreement to acquire Benaissance, a leading provider of integrated software-as-a-service technologies and services for health care premium billing, payment and workflow management, for total consideration of $80 million. WEX expects the acquisition to be slightly accretive in 2016, excluding one-time integration costs. Since its founding in 2006, Benaissance has revolutionized premium billing

hCentive, the leader in public health insurance exchange solutions, has implemented Arkansas Small Business Health Options, a state-based marketplace through which brokers and small businesses provide employees access to health insurance. Arkansas SHOP launched successfully under the My Arkansas Insurance brand on November 1. With the launch, Arkansas offers brokers across the state an end-to-end SHOP solution that includes online health insurance plan shopping

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and enrollment with integrated billing and payments to better serve their clients — for example, by creating online proposals for employers. hCentive is also proud to open their SHOP Contact Center in Little Rock, which is staffed by trained local Arkansas SHOP representatives to provide the support brokers and small businesses need to successfully enroll employees.

Sun Life Suite of Employee Benefits Now Available on Bloom Health Private Exchange Platform® The U.S. business group of Sun Life Financial has added a comprehensive suite of employee benefits to Bloom Health’s Private Exchange Platform® solution. Bloom Health employer customers can now select Sun Life’s short-term disability, long-term disability, life and accidental death & dismemberment, critical illness and cancer, accident and dental insurance products when tailoring their benefits package. This partnership allows Sun Life to further its growth strategy in the employee benefits market and its commitment to meeting the diverse needs of employers and their employees. Through a customized suite of options, Bloom Health helps brokers, health plans and employers create a more compelling benefits program that provides consumers with the education and technology tools to understand the wide array of offerings, while improving the business results of benefits partners.

Maestro Health and ARAG® Announce Partnership Maestro Health also recently announced that ARAG®, a leader in legal insurance, will be a featured voluntary benefit partner on its complete private exchange marketplace, maestroEDGE™. ARAG offers legal plans — including identity theft protection and caregiving services — to consumers, while maestroEDGE delivers the choice and decision support needed for the optimal employee benefits experience. Maestro Health owns, operates and integrates the key components of employee health and benefits, including a private exchange marketplace, benefits administration, ACA compliance and self-funded solutions.

Paychex Expands Its Private Exchange Offerings for Employers Nationwide In time for open enrollment, Paychex, Inc., a leading provider of payroll, human resource, insurance and benefits outsourcing solutions for small- to medium-sized businesses, has announced the addition of new tools and resources available through the Paychex Insurance Agency (PIA) Personal Marketplace, a private insurance exchange where employees who are not eligible for group coverage can shop, compare and purchase individual health insurance from a variety of insurance carriers. In its second full year, the Personal Marketplace offers a convenient way for employers who are not required to offer a group plan under the Affordable Care Act to help their employees gain access to coverage, and avoid increasing penalties for non-coverage under the ACA’s individual mandate to purchase health insurance.

EIIA, ConnectedHealth Deliver Award-Winning Benefits Offering to Institutions of Higher Education ConnectedHealth, a leading private insurance exchange company, and Educational & Institutional Insurance Administrators, a not-forprofit organization that provides insurance and risk management services to member colleges and universities, recently announced the implementation of the My Benefit Basket™ platform for medical and ancillary benefits for two EIIA member institutions. In addition, the

benefits platform will be offered to all EIIA member institutions by the end of 2016. With regulatory changes afoot and demand for an easier and paperless benefits enrollment process, EIIA realized it needed to re-imagine how to deliver benefits to its member institutions. Together with ConnectedHealth, EIIA customized an online offering that meets the needs of its members’ entire workforce, whether part-time, tenured or pre-retiree.

Employees Embrace Choice According to Liazon Private Exchange User Survey A new survey by Liazon found that employees using a private exchange are embracing choice when it comes to their benefits enrollment process and making good choices when given the right tools. The survey reveals that employees genuinely enjoy being in the driver’s seat when it comes to choosing their benefits. When asked if they preferred to choose for themselves or have an employer do so, an overwhelming 96 percent said they would rather make their own selections. From the employer perspective, the study found that eight out of 10 employers are satisfied with the exchange overall, seven out of 10 have experienced streamlined administration, and seven out of 10 were able to stabilize or even reduce benefits costs in the first year after moving to an exchange. The survey clearly indicates that employees are making informed decisions based on what’s right for their unique needs — not just what’s light on their wallets. In fact, price is not the largest driver of benefits selection. The majority chose the benefits they did because they provided the right level of coverage.

AmeriHealth New Jersey Enhances Private Exchange for Small Businesses with New Software Technology AmeriHealth New Jersey announced that its private exchange, MyAHNJ, now provides enhanced technology that offers employer groups a comprehensive selection of products for their employees through a guided online shopping site. In 2013, AmeriHealth New Jersey began offering a defined contribution model for small businesses, which eliminates the “one-size-fits-all” approach employers often use when selecting a health insurance plan for their employees. With this new option, employers give employees a set amount of money to shop for a health benefits plan on a private exchange. Employees are given a username and password to log on to MyAHNJ and shop for plans preselected by the employer. The model not only helps employers manage costs more effectively, it allows employees more options to select a plan that is right for them. With the new software technology provided by Array Health, MyAHNJ is more comprehensive than ever.

Purchasing Alliance Solutions’ Private Benefits Exchange, GeorgiaPIE®, is Open for Business CieloStar recently announced that the Purchasing Alliance Solutions’ private benefits exchange, GeorgiaPIE®, is now offering a broad array of employee benefits for employers in Georgia. GeorgiaPIE includes medical insurance plans, some with unique funding arrangements, and supplemental insurance products, as well as administrative and compliance products to assist and protect business owners. As more employers and their benefits advisors work to comply with the ACA and manage costs associated with benefits, they are turning to firms like Purchasing Alliance Solutions, a Roswell, Georgia-based aggregator of innovative benefits solutions designed to create packaged cost savings and administrative ease for employers. HealthCare Exchange Solutions™ I www.TheIHCC.com I Fourth Quarter 2015

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PRIVATE EXCHANGES BY JEFF YANIGA CHIEF REVENUE OFFICER MAESTRO HEALTH

Private Exchange Tailwind 2016: The “Cadillac” Tax

ver been to a wedding with an open bar? At an open-bar wedding, consumption increases. People order off the top shelf. More drinks are wasted. More people are too. Have a sip, set it down. Let’s do shots. A study was done about the number of shots done at an openbar wedding versus a cash-bar wedding. Six times as many shots are done at an open-bar wedding! I just made that up, but my guess is that it probably is true! What the heck, it’s “free”. Generally, the average open-bar wedding attendee is “inefficient”. The legislative hypothesis is that rich health plans promote this same irresponsibility. The “Cadillac” tax theorizes that employers and employees will act more responsibly if they have to pay 40 percent more for that extra couple of drinks.

Here’s a Problem Most of the early press on the “Cadillac” tax suggested that only the fat cats would be affected. Not the case. Brian Marcotte, CEO of the Washington-based National Business Group on Health, stated “nearly half of large employers say that, if they don’t take additional measures to control their costs, at least one of their health plans will trigger the 40 percent excise tax... when it goes into effect in 2018.” This is basically saying that “the ‘Cadillac’ tax is really not a tax on generous plans, it’s a tax on all plans — eventually all plans will trigger the ‘Cadillac’ tax.” Worth repeating: “Eventually all plans will trigger the ‘Cadillac’ tax”.

Health Care Inflation A recent Forbes article all but predicted a health care bubble. The logic makes sense: over the last five years, employers have deployed high deductible health plans to decelerate health care spend inflation. Faced with painful deductibles, many stopped going to the doctor. Fewer people go to the doctor, less spend. Yeah! But wait. If sick people don’t go to the doctor because of a high

deductible, they don’t get better. The bubble expands. They may get worse. Much worse. Eventually, an unattended early visit results in a massive, expensive incident. The bubble expands. Hospitalization? Surgery? Very expensive medicine? Pop! Huge expenses for the employer and the employee.

The Cash Bar is Coming: Private Exchanges Are One Answer The time to act for employers to start talking about the cash bar is now. By 2018, it is too late. By the way, 2018 — in the benefits world — is really 2017. 2017 is when the planning for January 1, 2018 effective dates must be complete. By using a private exchange in 2016 for 2017 effective dates, employers can wade their employers into these new waters. The private exchange model can educate users on the importance of choosing the right plan. It can give them tools to evaluate options and pick the one that suits their needs. It can introduce the idea of defined contribution. Defined contribution is one key strategy to avoid the “Cadillac” tax! And last, but not least, the private exchange model can provide post enrollment tools and services to help people use the cash bar most effectively. It can tell them about other bars that have the same drinks, but they cost less! All this said, the “Cadillac” tax law may change. Republicans want to repeal it. Labor unions want to repeal it arguing that in encourages employers to cut benefits. Leading Senator Harry Reid wants to fix it. The White House is defending it as is. Surprisingly to some, Hillary Clinton has broken ranks saying it should be repealed, and she has proposed that she can make up the $87 billion with other health care reform plans. Many predict change, but the legislative intent is likely to remain. Regardless of how the political winds blow, is the time now for employers to deploy the cash bar. Everything else consumers buy is a “cash bar”, why not health care?

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PERSPECTIVES

What Small Employers Need to Know about the Affordable Care Act BY GEORGE TZINAS » CHIEF EXPERIENCE OFFICER » BENEFITALIGN

he Affordable Care Act is very specific in outlining employer responsibilities for small and large employers. The size and structure of your workforce determines what taxes, subsidies and penalties apply to you. Because there are different provisions of the ACA for small and large employers, we will tackle each segment separately, beginning with a summary for small employers first.

Seasonal Employees Seasonal workers are taken into account in determining the number of full-time employees only if they worked for more than 120 days during a calendar year.

First, the good news: small employers are exempt from many of the ACA provisions and requirements, including the employer shared responsibility provisions and the employer information reporting provisions. Now, the less good news: the definition of a small employer is not as simple as it sounds, and, as you can expect, there are lots of rules and regulations to consider when determining your status.

One additional item to consider: if you are part of a larger organization with common ownership, the ACA aggregates all the employees across all the related groups and considers that as a single employer.

Under the ACA, a small employer is defined by the IRS as: An employer with fewer than 50 full-time employees, including full-time equivalent (FTE) employees, on average during the prior year. What is an FTE? A full-time equivalent employee is an individual employed on average at least 30 hours of per week. One hundred thirty hours of service in a calendar month is treated as the monthly equivalent of at least 30 hours of service per week. Chances are you probably have a mixed group employees with some full time, some part time and maybe even seasonal workers. Well, there are regulations for non-full time employees: Part-time Employees Part-time employees are counted as partial FTEs. Basically, two half-time employees count as one FTE. That means 20 half-time employees are equivalent to 10 FTEs.

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If your regular workforce changes throughout the year, you’ll need to use average workforce size to determine small or large group status.

And one final note on group status: the ACA had a provision that all groups from 51 to 100 employee size would be defined as part of the small group market beginning in 2016. The president recently signed into law an amendment to the ACA that allows states the option of keeping the existing 50 employee definition or moving to the 100 employee definition. Without this change, many firms that are considered large group today would have been forced to purchase coverage in the more regulated — and more expensive — small group market. Now that you’ve determined your company is considered a small employer under the ACA, what do you need to know as an employer? The IRS and Small Business Association have compiled a list of items that apply to small employers. Not all of these provisions may apply to all small groups employers. As a small group employer: t You must withhold and report an additional 0.9 percent on employee wages or compensation that exceed $200,000 (the employer portion of

the tax remains unchanged at 1.45 percent). You may be required to report the value of the health insurance coverage you provided to each employee on his or her Form W-2. Effective for calendar year 2015, if you provide self-insured health coverage to your employees, you must file an annual return reporting certain information for each employee you cover. The first of these reports must be filed in early 2016. Refer to the IRS website for more information. Also, if you self-insure, you may also be required to pay a fee to help fund the Patient-Centered Outcomes Research Trust Fund.

Some small employers choose not to offer employer sponsored health plans to your employees, but instead offer to reimburse employees for premiums they pay for health insurance. This is called an Employer Health Care Arrangement or Employer Payment Plans. There have been changing regulations around this type of arrangement, but generally these do not satisfy the employer requirements under the ACA and may be subject to $100/day excise tax per applicable employee. You can find out more about Employer Payment Plans on the IRS website. Of course, there are also many other requirements that have been in force for several years for employers of all sizes who offer group coverage — Exchange Notification, Minimum Plan Requirements, Eligibility and Enrollment Requirements. To read the rest of Tzinas’s insights on ACA requirements for small businesses, please visit www. theihcc.com.

PERSPECTIVES

Health Care Exchanges are Changing the World of Benefits Even More than Parachute Pants Changed the World of Fashion BY SCOTT CARVER » PRESIDENT » PLANSOURCE

The benefits world is now in the midst of a similar change, stemming from the rising popularity of private health care exchanges using defined contribution benefit models. The private exchange market, or a hybrid model in which employers adopt characteristics of an exchange such as defined contribution, ACA compliance and multiple health plans offered by diverse carriers, is projected to grow by the millions in the next few years. Six million U.S. employees and their dependents enrolled in a private exchange for their 2015 benefits, up from three million in 2014, according to an Accenture report from April 2015. We are just beginning to understand the implications of this movement, but it is safe to say that, like the retirement world, the benefits world will never be the same again. The advent of the health care marketplace The definition of a private exchange is still evolving. And like all new concepts, what it started as is not necessarily what

n the 1980s, a huge shift occurred in the way retirement plans were funded. Traditional, company-funded pension plans began to be replaced by self-funded 401(k) plans, which were cost effective for employers and gave employees unprecedented freedom to invest for their retirement. Many thought it would never catch on, but 401(k) plans were quickly adopted by companies of all sizes, and the retirement world has never been the same. Nearly 80 percent of full-time workers now have access to retirement plans like 401(k)s, and more than 80 percent of these workers participate in a plan.

Exchanges have given consumers more power to control their benefits coverage, and in doing so, have also made consumers responsible for choosing appropriate coverage. The number of plans offered in a private exchange is typically three times higher than in a traditional defined benefit model. Choice is good, but it does require that consumers have enough information to make intelligent decisions. HealthCare Exchange Solutions™ I www.TheIHCC.com I Fourth Quarter 2015

PERSPECTIVES it will end up being. But in its simplest form, a health care exchange is an online marketplace where consumers can shop for and enroll in health care plans. This model has far-reaching consequences, due primarily to the inherent retail nature of a marketplace. Traditionally, employersponsored benefits coverage used a wholesale model. Companies bought plans in bulk from a single carrier and parceled them out to employees, who had very little say in how and by whom they were covered. The consumer was removed from the purchasing process. Exchanges, on the other hand, use a retail model. In essence, a marketplace is set up with a variety of plans offered by multiple carriers and employees can pick the plans that are best for them. Now, at first glance, this change from a wholesale to retail marketplace model may not seem too significant. But when you think about all that it implies, you realize that it is enormous. Retail is a lot different than wholesale. To be successful, a retail set-up requires a much higher level of service, transparent pricing, a broad selection of products, and an intuitive and attractive shopping experience. A retail experience puts consumers front and center in the purchasing process. They have the wallet and make the final buying decision. So by moving health plans from a wholesale to a retail model, the exchange marketplace concept has given consumers an unprecedented amount of control over how they get health care coverage. With great power comes great responsibility Exchanges have given consumers more power to control their benefits coverage, and in doing so, have also made consumers responsible for choosing appropriate coverage. The number of plans offered in a private exchange is typically three times higher than in a traditional defined benefit model. Choice is good, but it does require that consumers have enough information to make intelligent decisions. Let’s face it:

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

benefits can be confusing, and many employees go into open enrollment armed with precious little knowledge about benefits plans and the terms used to describe them. This is remarkable, considering that insurance and benefits are typically one of the largest expenses in a family’s budget. Back to the 1980s, when 401(k) plans hit the scene, the majority of consumers were ill-equipped to make investment decisions for their retirement funds. Eventually, however, an entire industry sprang up offering to educate and guide fledgling investors on the options that were right for them. We are seeing a similar movement today to fill the need for better education and guidance around health care plans and benefits. Employers are currently taking the lead in this effort, and many now conduct full-scale communication campaigns to educate their employees on what plans will be offered and explain some of the more commonly misunderstood benefits terms. A multi-pronged approach tends to work best with in-person meetings combined with videos, printed and online materials. As control of health care plans shifts to the consumer and new regulations from the ACA are making benefits increasingly complex, it would be fair to ask: why are employers still in the benefits business? Wouldn’t it be easier to just leave it completely to the consumers? Easier, maybe, but probably not in the employer’s best interest. Benefits are a big part of an employee’s overall compensation and can play a significant role in attracting, retaining and engaging employees. According to the Metlife Employee Benefits Trends Study, 71 percent of employees who are satisfied with their benefits remain with their company, and employees who are satisfied with their benefits are four times more likely to be satisfied with their jobs. Many employers are finding private exchanges (or characteristics of exchanges) to be the most effective way to offer the best compensation package

to their employees. But they do need help. And that is where technology comes in. Technology is no longer optional The world of benefits has become increasingly complex, especially with new reporting and compliance requirements set forth by the ACA. Health care exchanges have made it possible to offer more plan choices in a simplified way, but there are many more moving parts than in a traditional defined benefits model. To run an exchange effectively it is just not feasible to use paper plans to sign up employees for benefits. That is why more and more employers are adopting technology for benefits shopping and enrollment. Good benefits software saves employers time in administration and gives employees a much better benefits experience, educating them and engaging them along the way. Software with good decision support can be coupled with live support by licensed agents to make benefits shopping and enrollment quicker, easier and (dare I say it?) even enjoyable. The 1980s taught us many things. Some things, like parachute pants and shoulder pads, are probably best forgotten, but the lessons learned from the shift to 401(k) retirement plans should be remembered well. Consumers ended up with more control of their retirement funds due to the shift, and now consumers are gaining much more control of their benefits coverage due to the shift to health care exchange models. So I say embrace the spirit of the 80s. Go put on your Members Only jacket, pop a Van Halen cassette in your boombox and rock on to the new wave of change health care exchanges are bringing. Scott Carver is president of PlanSource and is an entrepreneur and industry innovator with more than 28 years of executive level management experience at some of the nation’s top health care and insurance organizations. Prior to PlanSource, Carver was the founder and president of SYLINQ Corporation where his strategic guidance resulted in significant growth and recognition as an industry leader in large employer benefits administration.

A customizable way to simplify benefits administration, lower costs, and encourage employees to take an active role in their health. We offer: Health Savings Accounts Health Reimbursement Arrangements Flexible Spending Accounts Health Incentive Accounts Other specialized solutions

Visit us at Booth #114 to learn more.

The Evolution of Private Exchanges BY MIKE SMITH » AVP AND DIRECTOR OF EXCHANGE SOLUTIONS » LOCKTON BENEFIT GROUP

hen I joined Lockton a few years back as director of our Exchange Solutions practice, the headlines in employee benefit publications screamed “Private Exchanges Could Trigger Health Benefits Revolution” or “Meet America’s Private Health Care Revolution” or “A Health Care Revolution on Private Exchanges.” Technology firms, carriers, brokers and consultants were all rapidly building out exchange products and services, as well as creating alliances to serve this market. At the same time, enrollment projections from many reputable analysts claimed that between 12 and 20 million Americans would receive benefits through an exchange by 2016. When I visited with our associates, there was a large demand to learn about this emerging market. Clients also were bombarded with sales and marketing efforts trying to stoke the flames of private exchanges. Revolution was in the air. So let’s fast-forward to present day: • The aggressive enrollment projections have not lived up to reality, as the market is growing much slower than expected. • Several exchange providers have been acquired (e.g. Bloom Health, Extend Health, Liazon and bswift). • New models for the provision of benefits are entering the market (e.g. Zenefits, Oscar and ADP). • Some clients that were early adopters of private exchanges are moving out of the strict product models while maintaining several of the advantages of private exchanges. • Providers are becoming more flexible. In earnings calls this quarter, firms talked about the variety of their exchanges and offerings. A leading exchange provider stated: “We’ve got exchanges, large, medium, small. We’ve got exchanges that are fully insured and selfinsured.” This was a marked change in direction from a few years ago when this agency introduced its exchange as multi-carrier and fully insured for the larger market. In my opinion, these signs point to the fact that exchanges are less revolutionary rather than evolutionary, as employers look for ways to control costs, provide additional benefit choice, engage with their workforce more effectively, find better and cheaper ways to administer benefits and achieve compliance.

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

Since the consistent top driver for an exchange is better cost control management, and only 14 percent believe that technology will help them achieve this goal, exchanges must be implemented solutions aimed at a different set of targets (i.e. employee engagement, communication, etc.). The forces driving some of the exchange market continue to exist and in fact may be amplified. Employers have invested heavily in their benefit programs and many are hesitant to implement a wholesale shift in the way these valued plans are structured which is what many of the private exchanges represent. A recent industry survey found that employers are planning to spend heavily on benefits technology in 2016, especially in the areas of benefits administration, benefits enrollment and employee benefits portals. One of the central components of a private exchange should include services for communication, enrollment and administration. But these services can be (as they historically have been) purchased outside of an exchange in a traditional benefits administration manner. With new demands from the Affordable Care Act hitting this year for reporting, many employers are looking to enhance their existing benefits administration services as opposed to the wholesale new approach represented by many private exchanges. The survey also shows that 14 percent of the employers feel that these technology investments will help reduce costs as opposed to gain better insight and control over benefits and the associated administrative processes. Since the consistent top driver for an exchange is better cost control management, and only 14 percent believe that technology will help them achieve this goal, exchanges must be implemented solutions aimed at a different set of targets (i.e. employee engagement, communication, etc.).

While not as prevalent as many predicted, private exchanges are slowly gaining steam and evolving to meet the needs of employers. Employers Considering a Private Exchange

industry experts expect...

71 %

66 %

To me, it is very reminiscent of the change from health maintenance organization restrictive network plans to more open preferred provider organization models in the late 1980s and 1990s. The market liked the cost control elements of the HMO but needed a more open architecture to satisfy the broader needs of their employees. Likewise, clients that implemented private exchanges want more flexibility than the early market providers were willing to give. In some cases, that circumstance resulted in lost clients, and in other cases, the vendors have loosened their approaches to retain existing clients and attract new ones. For instance, in the same earnings call regarding exchanges, that leading exchange provider referenced above also said: “Our range of solutions provide clients with a unique ability to seamlessly transition between funding choices depending on their level of risk tolerance.” This is a great example of market evolution since this firm’s original exchange was implemented solely under fully-insured funding mechanisms. This fall, I had the privilege to visit with a handful of benefits administration vendors to review their strategy, successes and road maps. It is clear that these firms have been putting good use to the capital that has flowed into their space either through acquisition or capital injection. Employers will soon see these enhancements as well in the areas of decision support, selfservice tools, physical expansion for expanded teams and services. Employers will be able to take advantage of these developments either through a private exchange that these firms support or directly in a traditional benefits administration approach. Sounds much more like evolution than revolution. Wouldn’t you agree?

The Evolution of Private Exchanges

2016

of all employers to adopt a private exchange approach by 2018

20-30

21 %

Another sign that we are in a much more evolutionary than revolutionary market is the fact that a number of early adopters to private exchanges are moving away from the strict contracts, service models and carrier/plan design relationships sold primarily by consulting firms and technology providers. We have worked with employers that have been disappointed in exchange results due to: • Unrealized cost projections; • Broken service delivery models; • Lack of deep consulting expertise; • Lack of access to data; • Lack of compensation transparency; and • Low/no utilization of plans and services.

that could mean... 2017

Americans on private exchanges by 2019

2018

Source: Midwest Business Group on Health

15-20

million

Forces Driving the Exchange Market

Healthcare Cost Inﬂation

Government Regulation The Affordable Care Act (ACA)

MultiGenerational Workforce

Technology Evolution

Capital Inﬂux

Components of a Private Exchange

EmployerSponsored Plan

multiple options and plans to create a vibrant marketplace

Marketplace/ Shopping Experience for the Consumer

enrollment decision support tools

Online Technology integrated with or potential replacement Platform for beneﬁts administration system EmployerFunded Deﬁned Contribution Enrollment Advocacy Resources

shifting the paradigm from payroll deduction to providing funds and choice

online and call center