First Quarter 2015
Exchange
About Innovative Health and Benefit Marketplaces
Investigating Private Exchanges The Second Annual PEEC Study 2015 Perspectives from Industry Leaders Exchange Profile: Genius Avenue The Official Magazine of
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Projections from organizations like Accenture and Oliver Wyman suggest that 35 to 75 million Americans will receive their employee benefits via a private exchange within the next few years. Are you ready to make the transition? With PrivateHealthCareEXCHANGES.com, The Institute for HealthCare Consumerism has aggregated 160+ private exchange solutions to create the industry’s premier guide to help you — employers, health plans, brokers, advisors and consumers — to navigate this sea of change in employee benefits.
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INSIDE FEATURE 13 More Employers Investigating Benefits of Private Exchanges Private exchanges have been creating a buzz in the employersponsored health care marketplace. After a flurry of activity in 2013 and 2014 among large employers, many feel we have moved beyond the “early adopter” stage and are poised for broader acceptance. Private exchanges are becoming more commonplace with more organizations than ever before implementing exchanges or actively considering them. The second annual study by the Private Exchange Evaluation Collaboration confirms that interest in private exchanges continues among employers for full-time active and retirees. The national survey, based on the responses of 446 employers, reports 47 percent of respondents have already implemented or are considering a private exchange for full-time employees by 2018, and 37 percent of respondents are doing the same for retirees. This year’s survey is also the first national survey that captures the experience of early adopters of private exchanges for active employees as well as retirees. By Barbara Gniewek, Principal, PwC, and Jasmine Macies, Associate, PwC
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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.
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Briefs & Innovations Keeping you up-to-date with the latest news, research and innovation in health insurance exchanges (both
PERSPECTIVES 7
Private Exchanges: An Evolving Option... But Not a Silver Bullet It’s the beginning of a new year, and employees and employers alike are ready for a fresh start. And, the first item on many agendas is to restrain ever-increasing health benefit costs. As this price trend continues on the steep slope north, with the passing of the Affordable Care Act (ACA) in 2010, proactive organizations have been on the hunt for ways to minimize the cost of their health benefit plans, harboring increased awareness of private health insurance exchanges, better known as private exchanges. By Jim O’Connor, President, Employee Benefits, CBIZ, Inc.
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What’s Next for Private Exchanges? Four Considerations Last year, as the clock ticked down to 2015, private exchanges experienced modest levels of adoption. By and large, the first significant cohort to embrace this approach were large employers with sophisticated benefits personnel and ample money at risk in “pay or play” analyses. They found private exchanges to be a viable strategy, and many chose this route rather than abandoning health insurance and sending their employees to public exchanges. By Mike Sullivan, EVP and CMO, Digital Insurance and Digital Benefit Advisors
10 APIs Enable Speed to Market with Consumer Friendly Benefits Exchanges The Affordable Care Act offers consumers a much wider array of health care choices. In the past, employers handed employees a packet of paper with pre-selected options for health care and benefits. Now a whole new world is opening up for employees to shop and compare all kinds of plans in online exchanges to assemble a personalized package that includes both traditional and non-traditional benefits. By Dayne Williams, CEO, PlanSource
public and private) and defined contribution.
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Exchange Profile Why “Blended” Exchanges are the Right Solution for Employers Looking to Recruit and Retain Lower-Wage Workers A main focus around benefit strategies for 2015 and beyond has been on offering health coverage to eligible employees, and for good reason since employers who don’t
offer qualifying plans to these workers will face hefty fines. However, as the job market for quality part-time workers becomes much more competitive, it will also be important to have recruitment and retention strategies in place throughout the year for this segment of the workforce. By Ben Rozum, President, Genius Avenue
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PUBLISHER
Exchange www.theihcc.com VOLUME 2 NO. 1 | FIRST QUARTER 2015
Private Exchanges: A Catalyst for Consumerism? In the health and benefits industry, there has been no hotter topic than private exchanges over the past 18 months. While other new technology trends — such as transparency tools, mobile health apps and wearable devices — have garnered significant attention, private exchanges have seemingly polarized the industry in a way we haven’t previously seen with these other trends.
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 MANAGING DIRECTOR
Brent Macy 404.671.9551 ext. 103 · bmacy@theihcc.com CHIEF MARKETING OFFICER
We have heard from the naysayers: private exchanges are nothing more than an enrollment platform that shifts more and more costs to the employee population. And we have heard from the soothsayers that proclaim private exchanges will be the future of employee benefits in just one or two more enrollment cycles. But what is the most likely path of the private exchange future? And realistically, how will the adoption of private exchange solutions affect the employer-sponsored health and benefits? In this issue, we have provided insightful perspectives on the future of private exchanges from three industry veterans: Mike Sullivan, EVP and CMO, Digital Insurance; Dayne Williams, CEO, PlanSource; and Jim O’Connor, president of Employee Benefits, CBIZ.
Andrew Dietz adietz@theihcc.com MANAGING EDITOR
Jonathan Field 404.671.9551 • jfield@theihcc.com SENIOR EDITOR
Heather Loveridge hloveridge@theihcc.com ART DIRECTOR
Kellie Frissell 404.671.9551 ext. 107 · kfrissell@fieldmedia.com ASSOCIATE DIRECTOR OF EDUCATION SERVICES AND PROGRAMS
Dusty Rhodes CHAIRMAN OF IHC ADVISORY BOARD
In addition to these commentaries, for this issue’s feature, we are excited to have Barbara Gniewek and Jasmine Macies at PwC condense the latest research on private exchange adoption by the Private Exchange Evaluation Collaboration (PEEC), a business collaborative between the Northeast Business Group on Health, Midwest Business Group on Health, Employer’s Health, Pacific Business Group on Health and PwC. While I hope our readers find significant value in these pages, the articles herein are only a part of our efforts to illuminate the facts and possible pathways of the private exchange future. This March, we are excited to be hosting the first-ever Private Exchange FORUM, a new conference aimed at providing participants with a complete view of the private exchange landscape. The two-day event in Dallas will unravel the confusing tangle of models, choices and offerings that is the current private exchange market. With speakers from leading employers, brokerage firms, consulting practices, solution providers and health insurance plans, the Private Exchange FORUM agenda is designed to take attendees on a journey through the process of evaluating and selecting a private exchange model. Speakers and panelists include Paul Rogers, president, Pacific Resources; Bruce Sammis, CEO, Lockton Dunning Benefits; Scott Brown, private exchange offering lead, Accenture; Rob Butler, CEO, Maestro Health; Eugene Sayan, chairman, CEO and president, Softheon; Patty Fontneau, president, Private Exchange Business, Cigna; and many more. As you and your colleagues investigate the role of private exchanges in the future of your business, I hope you find the insights inside this issue of HealthCare Exchange Solutions and at our inaugural Private Exchange FORUM to be valuable guides in the process. Sincerely,
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
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Michelle Gatehouse 404.405.3007 • mgatehouse@theihcc.com Ted Arvan 678.296.1906 • tarvan@theihcc.com PARTNERS/ALLIANCES
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Karen Raudabaugh 404.671.9551 ext. 108 · kraudabaugh@fieldmedia.com HealthCare Exchange Solutions™ Volume 2 Issue 1 Copyright ©2014 by FieldMedia LLC. All rights reserved. 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.
Doug Field CEO/Publisher dfield@fieldmedia.com
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 Assurex Global Partners with GoHealth to Provide Employers with an Individual Exchange Solution Assurex Global recently announced a strategic partnership with GoHealth, the nation’s leading private health insurance exchange for individuals and families. The partnership addresses employers’ growing demand for non-group benefits solutions. Through the collaboration, all 48 of Assurex Global’s partner agencies in the United States can offer GoHealth’s private exchange to their employer clients at no cost. GoHealth’s exchange is tailored for individuals who are ineligible for group health insurance, including part-time employees, early retirees and COBRA-eligible individuals. Using GoHealth’s integrated enrollment platform, individuals can easily compare prices and benefits online from the nation’s top insurance carriers and obtain one-on-one enrollment support by phone from GoHealth’s licensed insurance advisors.
Sun Life Financial Offers Suite of Employee Benefits on Gallagher Marketplace Private Exchange The U.S. business group of Sun Life Financial has expanded the availability of its private exchange offerings to Gallagher Marketplace, including a comprehensive suite of employee benefits. Customers of this private exchange can select Sun Life products, including voluntary short-term disability, long-term disability, life and accidental death & dismemberment, accident, critical illness and cancer insurance. Now, Sun Life’s employee benefits are available through five private exchange partners. The Employee Benefits Consulting and Brokerage operations of Arthur J. Gallagher & Co. launched Gallagher Marketplace to help employers set predictable budgets for their employee benefits programs and to provide employees with a consolidated online benefits store.
Empyrean Selected as Technology Platform for New Private Exchange Partners Empyrean Benefit Solutions recently announced that it has added two companies to the growing list of partners using Empyrean’s technology to power their private exchange solutions. As brokers and insurance carriers look to expand their programs to meet the demands of a more consumer-driven health insurance industry, they have selected Empyrean’s integrated software platform as the technology to support an exchange option for their clients. Brokers and carriers recognize the growing need to support companies that wish to offer private exchanges to their employees while still offering traditional benefit plans. Empyrean’s technology platform was purpose-built to enable brokers and carriers to easily provide an exchange model and accommodate the evolving benefits strategies of their clients.
Time Inc. Selects Towers Watson’s OneExchange to Deliver Health Benefits to Employees in 2015 Towers Watson recently announced that Time Inc. has chosen Towers Watson’s OneExchange to deliver medical, prescription drug, dental and vision benefits to its full-time active employees and their dependents for the 2015 plan year. The new health and wellness program features choice in medical plans and in medical, dental and vision insurers. Time has also introduced a new voluntary wellness program that gives employees and dependents who actively participate the chance to earn well-being dollars. The company is adding benefits such as legal services and identity theft
protection to its existing voluntary benefits, as well as continuing to offer life insurance, flexible spending and commuter benefits.
PlanSource Appoints Nancy Sansom as Chief Marketing Officer PlanSource®, provider of the leading cloud-based health exchange and benefits engagement platform™, recently announced that Nancy Sansom has joined the company’s executive leadership team as chief marketing officer. A seasoned and dynamic executive with deep experience driving marketing, demand generation, business unit management, product management, software design and business development for high-growth SaaS companies, Sansom will be responsible for all aspects of marketing and communications for PlanSource.
Regence Marketplace Private Exchange Increases Options, HSA Adoption for Employees Regence Marketplace is gaining traction in its first full year in Idaho, Oregon, Utah and Washington. Available to employers with 100 or more employees, Regence Marketplace offers businesses a number of advantages, including the ability to control health insurance costs, predictably plan for future benefit needs and cater to a demographically diverse workforce. Through Regence’s private exchange, employees have the freedom to choose coverage that best fits their unique needs and budget, enabling more ownership over their health care decisions. According to a participating Idaho employer, one early result is an increased desire on behalf of employees to choose health savings account (HSA) plans through the private exchange.
WEB EXCLUSIVE Three Predictions for Private Exchanges: Version 2015 By Jeff Yaniga, Executive Vice President, Maestro Health Those of us old enough to remember the early days of e-commerce remember when all our customers had to have a website where they could sell stuff... whether it made sense or not. Board rooms everywhere were trying to figure out this wave and how they could serve their customer base via the Web. Over time, “killer applications” developed and companies figured out how to use the Web in a way that made sense. Is history repeating itself in the employee benefits space? If you attended a benefits conference in 2014, you were inundated with the buzz topic of the year: “private exchanges”. Trends are forming, which means we all start polishing off our crystal ball in an attempt to determine where this is all going: The consumer learning curve will spike upward. Consumer inertia. A consumer at rest remains at rest unless acted on by an equal and opposite force. The Affordable Care Act enables auto-renewal for those that do nothing, and do nothing is the expected action. The equal and opposite force will come in the form of narrower networks and premium increases. To read the full article, visit The Private Exchange Blog at PrivateHealthCareEXCHANGES.com. HealthCare Exchange Solutions™ I www.TheIHCC.com I First Quarter 2015
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PRIVATE EXCHANGE PROFILE
A New Era of Employee Benefits:
Why “Blended” Exchanges are the Right Solution for Employers Looking to Recruit and Retain Lower-Wage Workers BY BEN ROZUM » PRESIDENT » GENIUS AVENUE
A main focus around benefit strategies for 2015 and beyond has been on offering health coverage to eligible employees, and for good reason since employers who don’t offer qualifying plans to these workers will face hefty fines. However, as the job market for quality part-time workers becomes much more competitive, it will also be important to have recruitment and retention strategies in place throughout the year for this segment of the workforce. To capitalize on this opportunity, organizations should consider offering affordable, easy-to-administer benefits to non-eligible employees, along with targeted engagement strategies. Benefits could include comprehensive health coverage, as well as voluntary benefits without employer contribution that can be offered year-round.
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Blending these elements into an integrated model Blended exchanges have emerged and offer the advantages of a traditional private exchange, while also giving non-eligible workers the ability to access voluntary benefits and government-exchange plans — all in one place. This is essential since sending lower-wage workers who qualify for subsidies to a federal or state exchange does nothing to further an employer’s recruitment and retention objectives. It’s important to realize that certain private companies have received government certification to become Web broker entities, allowing them to instantly quote rates and enroll consumers in subsidized coverage, while using their own institutive Web interfaces and customer support. Employees can enroll through blended exchanges during the traditional open enrollment period for government exchangesponsored plans. They may also be eligible to enroll anytime they experience a Qualifying Life Event (QLE) such as the loss of qualifying coverage or the birth of a child. However, various voluntary benefits can be offered year-round. This gives individuals access to affordable benefits outside of the traditional open enrollment period, while also gaining familiarity with the blended exchange and their health options by the time the next open enrollment period for comprehensive health coverage starts. In addition to providing easy access to benefits, blended exchanges also feature integrated engagement capabilities that include targeted health education and information about the products available. Several key elements must be in place for a blended model to be effective. t The power of choice. Individuals should have access to 10-20 health insurance options in order to find a plan that meets their
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out-of-pocket costs, network access and premium preferences. Access to a wide variety of voluntary benefits is a significant plus because this allows individuals to access affordable options all year long. Year-round engagement strategies, like nurture email campaigns that are customized based on an individual’s benefit eligibility and interests. By highlighting a mix of products and general health information (both during and outside open enrollment), these campaigns ensure that individuals receive fresh content on a regular basis that is useful, educational and informative. Comprehensive support services. Licensed benefit specialists must be available to assist individuals with everything from comparisonshopping to product purchase. These highly trained individuals can offer expert guidance that considers an individual’s health requirements, budget and preferences. Streamlined administration. The best blended exchanges make offering multiple benefits easy by integrating enrollment, billing, administration, reporting, and product communication — so plan sponsors don’t have to manage these cumbersome tasks.
A platform for the future Genius Avenue is one organization that has launched a successful blended model called Genius Benefits, an online benefits marketplace that can be offered year-round. Genius Benefits includes major medical plans and voluntary benefits from trusted carriers. Individuals can access a variety of online selfservice features, but trained benefit specialists are available to walk them through the entire process. This support is provided whether an individual is looking for government-exchange plans, voluntary benefits or discount programs. A variety of strategies, such as nurture marketing emails and health information, are also utilized to engage individuals at every stage in this process. Blended exchanges can dramatically transform the way that employers engage, recruit and retain quality workers. Many forwardthinking organizations are already adopting these models to address the needs of non-eligible employees — a growing and critically important segment of their workforce.
PERSPECTIVES
Private Exchanges: An Evolving Option… But Not a Silver Bullet BY JIM O’CONNOR » PRESIDENT, EMPLOYEE BENEFITS » CBIZ, INC.
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t’s the beginning of a new year, and employees and employers alike are ready for a fresh start. And, the first item on many agendas is to restrain ever-increasing health benefit costs. As this price trend continues on the steep slope north, with the passing of the Affordable Care Act (ACA) in 2010, proactive organizations have been on the hunt for ways to minimize the cost of their health benefit plans, harboring increased awareness of private health insurance exchanges, better known as private exchanges. A private exchange is fundamentally an online marketplace for an organization’s employees, allowing them to pick and choose health care and other benefit options suitable for their needs – much like an online 401(k) platform. Given a menu of different health insurance options, life insurance options, medical and dental insurance, employees have numerous selections from which to design their personalized baskets of benefits for themselves and their families. Essentially, the strategy with private exchanges is for employers to set their spend on health & welfare benefits at a specific dollar amount for each employee (i.e. a defined contribution); so, by capping dollars spent, employers hold the line on their expense of these benefits while turning over the specific decision making on design to their employees. They will no longer have to produce a plan that will fit all employees’ medical and other benefit needs. Though the media has stirred up discussion around these platforms in recent years, the conversation hasn’t necessarily brought about wide employer adoption. Since large numbers of employers have yet to make the move toward these platforms, it is clear that
there is still some caution; because, despite the interest around this innovative solution to rising costs, the implementation of private exchanges as a staple of organizations’ benefit offerings presents many challenges. One thing to keep in mind is that, absent any cost containment strategy, private exchanges are at heart a cost shift; the employer locks in its expense and if premiums rise over time, the employees’ shares rise disproportionately. With this in mind, if the employer doesn’t put in continued efforts to rein in the health insurance cost increases and adjust the employer spend over time, the originally set amount is locked in, and nothing can be done to combat inflationary pressures that are driving up health care costs. Second, keeping in mind that the goal of a successful employee benefits program is to attract and retain top talent, the thoughtful employer has to understand that relinquishing responsibility for keeping health benefit costs low could lead to unhappy employees. Employers still need to be committed to cost containment, wellness and employee health management programs. Finally, though private exchanges give the employee the ability to choose between health care offerings, health insurance carriers are hesitant to offer themselves alongside their competitors. This is especially true for smaller organizations looking to set up private exchanges. A key driver for private exchange growth will be if, and when, health insurance carriers are willing to be offered side by side in the smaller and mid-size employer markets. With all of these factors taken into consideration, and despite the seemingly significant benefits associated with
setting up a private exchange, such as providing more employee choice (which is a very positive development), employers seem to be more inclined to stay the course with single health insurance carriers, spend the time to design plans with human resource departments and consultants and work on cost containment strategies – at least in the near future. The jury is out on exactly how much market share private exchanges will command in the near term. It could be years until private exchanges play a meaningful role in the health benefit space, as employers continue to evaluate the best solutions to providing high quality benefit programs. With that having been said, however, as private exchanges or other benefits administrative platforms that make it easier for employees to have more benefit choices evolve, we will see growing interest in the market. Until these changes occur, employers need to remain committed to health care cost containment and establishing employee benefit strategies that retain and attract top talent if they want to remain competitive in 2015 and beyond. CBIZ, Inc. provides professional business services that help clients better manage their finances and employees. CBIZ provides its clients with financial services including accounting, tax, financial advisory, government health care consulting, risk advisory, real estate consulting, and valuation services. Employee services include employee benefits consulting, property and casualty insurance, retirement plan consulting, payroll, life insurance, HR consulting, and executive recruitment. As one of the nation’s largest brokers of employee benefits and property and casualty insurance, and one of the largest accounting and valuation companies in the United States, the Company’s services are provided through nearly 100 Company offices in 34 states. www.cbiz.com
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WHAT’S YOUR EXCHANGE STRATEGY? WHAT’S YOUR Let Softheon help plan your next move. EXCHANGE STRATEGY? Let Softheon help plan your next move.
PERSPECTIVES
What’s Next for Private Exchanges? Four Considerations BY MIKE SULLIVAN » EXECUTIVE VICE PRESIDENT AND CHIEF MARKETING OFFICER » DIGITAL INSURANCE AND DIGITAL BENEFIT ADVISORS
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ast year, as the clock ticked down to 2015, private exchanges experienced modest levels of adoption. By and large, the first significant cohort to embrace this approach were large employers with sophisticated benefits personnel and ample money at risk in “pay or play” analyses. They found private exchanges to be a viable strategy, and many chose this route rather than abandoning health insurance and sending their employees to public exchanges. Yet private exchanges are still on the periphery of benefits solutions. Don’t for a second misconstrue the current level of adoption with long-term applicability, because they will become a central force in benefits strategies for a significant subset of employers. Surveys, prognosticators and news articles all agree that many employers expect to deploy them in the near future but are hesitant to immediately pull the trigger. Those of us offering exchange solutions celebrate the early adopters and continue to invest in product choice and solution functionality, while we wait for the inevitable tipping point. So what happens next? Just as they did with the individual-based public insurance marketplaces, carriers will lose their fear of the unknown and develop tolerances to private exchange business models. Also, the SMB (small and medium-sized business) market typically lags behind large employers when it comes to benefits trends. The next 18 months will bring continued growth among employers of all sizes, and then expect sea change. Meanwhile, here’s a look at four incremental ideas that few in the industry are discussing that will expand the adoption levels of private exchange solutions.
1. Declining Cost of Adoption Fee structures for exchange software
will drop significantly and mirror those of widely available basic enrollment solutions. Employers and advisors alike will begin to understand it is less about the software and more about everything else that will drive adoption into private exchanges.
offerings. In today’s evolving market, you can’t take a cookie-cutter approach. You need flexibility to enable employers to dip their toes in the water and position their workforce for bigger changes down the road.
2. All or Nothing? Consider a Transitional Approach
While there is tremendous focus on the design of exchanges and the reluctance of employers to matriculate, everyone seems to overlook the role of another key player: carriers. While their participation is crucial to the short- and long-term success of these benefits solutions, they seem to be dragging their feet for one core reason: control. Private exchanges present challenges to these organizations relative to control. Carriers have to rethink pricing and underwriting strategies. In addition, they need infrastructure to support the transformation.
One reason businesses are cautious about diving into private exchanges is the all-or-nothing proposition. Most exchanges offer a purist model: you either convert to a defined contribution strategy with predetermined “storefronts” or you continue to offer traditional benefits. Our company is testing an option that bridges these worlds. This transitional approach enables employees to shop online for their benefits, but they are not limited by a defined contribution model. Employer funding does not change, but it introduces employees to the concept of selecting their own benefits among a broader selection of plans and taking more responsibility for their coverage. Such an intermediary strategy could work well for companies that have diverse pay scales, for example in a business where a lot of employees earn $35,000 annually and another faction makes six figures. In addition to setting up different classes of employees, it also can accommodate contributory and non-contributory components of a benefits package. For instance, the company pays 100 percent of life insurance, but contributes nothing toward disability coverage. The key is that the employer does not yet have to lock in to a defined contribution. Many players are struggling to create and define the boundaries of private exchanges. Our company discovered we don’t have to deliver standardized product
3. The Carrier Factor
Carriers that have the most market share experience the greatest trepidation to change. For example, the Blues generally maintain the largest market share in every state, particularly down market among small- and mid-sized business. Yet, in our experience, these organizations often lack technological flexibility. At present, many carriers are so concerned about building and perfecting their own private exchange solutions they are not able to collaborate well with other solutions they often deem as competitors. This comes on the heels of an almost exclusive focus on preparing for public exchange activities largely focused on the individual marketplace. As the market matures and carriers work through these challenges, expect to see greater cooperation and more plan options available through everybody’s exchanges. To find out Mike’s final consideration, visit our website at www.theihcc.com.
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PERSPECTIVES
APIs Enable Speed to Market with Consumer Friendly Benefits Exchanges BY DAYNE WILLIAMS » CHIEF EXECUTIVE OFFICER » PLANSOURCE
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he Affordable Care Act offers consumers a much wider array of health care choices. In the past, employers handed employees a packet of paper with pre-selected options for health care and benefits. Now a whole new world is opening up for employees to shop and compare all kinds of plans in online exchanges to assemble a personalized package that includes both traditional and non-traditional benefits. All this choice means consumers face more complexity: health insurance plans are not easy to understand, and the ACA doesn’t make it any easier. For insurance carriers and brokers, more choice means more competition. Carriers will see their products displayed side-by-side with competing products on exchange marketplaces. Virtually every carrier in the country — medical, voluntary or ancillary — is right now trying to decide which exchange (or exchanges) they should offer their products on, or whether they should perhaps build their own exchange. Brokers are pondering the same question. All are wondering how best to compete in this evolving game. The winners will be those who make it easiest for consumers to shop and enroll online. For larger brokers and carriers who want to be in the enrollment business, the key to success is to get to market fast with a beautifully designed consumer experience that addresses the needs of their unique markets and differentiates themselves from the competition. This should be coupled with a technology back-end that makes it easy for everyone in the ecosystem — carriers, brokers, TPAs, employers and employees — to do business together. Building the back-end is a complex undertaking, and an end-to-end shopping and enrollment platform with all the
capabilities for business rule configuration and transaction processing requires tens of millions of dollars and several years to fully develop. Furthermore, as we all know, the project is never done. The regulatory environment and consumer expectations will continue to change, requiring substantial ongoing investments. But, this need not be a barrier to entry. There is a better way. Companies can design a front-end experience that reflects their brand and user experience needs and use APIs (application programming interfaces) to connect to an existing back-end processing engine. This is a great option for large insurance carriers, brokers or even HCM companies that have already invested in consumer-facing technology and want to maintain control of the user experience without waiting years to build out the full solution. In addition, this can be done for about one tenth of the budget, offering speed to market without compromising the consumer experience. If you don’t have the resources or desire to develop a custom front-end, you can buy a complete exchange platform — front-end and back-end — and differentiate your offering through the products that you sell. The main point here is to focus on the consumer experience. There is a lot of technology innovation going on in the area of decision support that you can bring to bear on creating customer delight. Here are some things to consider:
Ease of use With the first generation of decision support tools, buyers had to fill out lengthy questionnaires in order for backend analytics engines to evaluate their health care needs, tolerance to risk and recommend a plan. That’s not a user-
friendly experience, and shoppers today won’t tolerate long forms if they can avoid it. The next generation of tools can bring in third-party data, such as claims and prescription information, to lighten the burden on the buyer, shorten the process and make better recommendations.
De-mystifying the SBC The ACA mandates that every plan has to have a standardized Summary Benefits Comparison (SBC), such that consumers can make apples-to-apples comparisons between plans. The government dictates what the SBC looks like — a big grid with numbers on it and a lot of acronyms: HMO, PPO, ACO, etc. For the most part, the consumer doesn’t understand how to read it, or more importantly, what it means. Translation is needed. Providing tools to help buyers understand the ramifications of different plans will make it a lot easier for them to shop and compare on your platform.
Surfacing the network Network choice also has big ramifications. Every plan has an in-network cost and an out-of-network cost that’s much higher, so obviously consumers want to be able to easily look at the network before making their choice. The ACA has also created an additional choice of health care network called an accountable care organization (ACO). If people have doctors who are important to them, it’s important to know, “Is my doctor part of this network or ACO?” It should be really easy for them to get that information while they’re shopping for plans. Delivering complex information in a way that’s easy to understand and making it dead simple for employees to enroll is the winning formula. To read the rest of the article, visit our website at www.theihcc.com.
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MORE EMPLOYERS INVESTIGATING BENEFITS OF PRIVATE EXCHANGES BY BARBARA GNIEWEK » PRINCIPAL » PWC & JASMINE MACIES » ASSOCIATE » PWC
HealthCare Exchange Solutions™ I www.TheIHCC.com I First Quarter 2015
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Private exchanges have been creating a buzz in the employer-sponsored health care marketplace. After a flurry of activity in 2013 and 2014 among large employers, many feel we have moved beyond the “early adopter” stage and are poised for broader acceptance. Private exchanges are becoming more commonplace with more organizations than ever before implementing exchanges or actively considering them. The second annual study by the Private Exchange Evaluation Collaboration (a business collaborative between the Northeast Business Group on Health, Midwest Business Group on Health, Employer’s Health, Pacific Business Group on Health and PwC) confirms that interest in private exchanges continues among employers for full-time active and retirees. The national survey, based on the responses of 446 employers, reports 47 percent of respondents have already implemented or are considering a private exchange for full-time employees by 2018, and 37 percent of respondents are doing the same for retirees. This year’s survey is also the first national survey that captures the experience of early adopters of private exchanges for active employees as well as retirees. This year’s results show that employers remain committed to providing benefits to their full-time employees, with 96 percent of respondents saying they were very likely to offer coverage in 2016. That number is up from 77 percent in last year’s survey and remains high over the near term, declining to 88 percent of respondents very likely to offer benefits in 2018. Though employers seem committed to provide benefits to their active employees, interest in the public exchanges for other population segments has grown. Most notably, 26 percent of respondents have implemented the public exchange for COBRA participants, and 11 percent have implemented for pre-65 retirees, both up from 6 percent in 2013. Commitment to retirees appears to continue to deteriorate with only 33 percent of respondents very likely to offer coverage to post-65 retirees in 2015, decreasing to 24 percent in 2018. While employers are more committed to full-time active coverage, the cost of care is still a concern and employers are beginning to consider alternative strategies, albeit with caution. Private exchanges are one of the strategies being considered. Twenty percent of respondents are considering a private exchange for full-time actives in 2016, 11 percent in 2017 and 10 percent in 2018. Four percent of respondents have implemented a private exchange for full-time actives before 2015, and 2 percent are implementing in 2015. As results from early private exchange adopters continue to emerge, many employers appear to be taking a step back to more carefully evaluate private exchanges, their features and the costs before jumping in. Some hesitation stems from employers wanting to be fast followers rather than leaders, with 57 percent of respondents indicating that if an industry 14 First Quarter 2015 I www.TheIHCC.com I HealthCare Exchange Solutions™
peer moved to a private exchange they would be more likely to do so. Due to the various private exchange models, the sheer number of exchanges and the wide variation in private exchange offerings, employers are seeking help to evaluate the different exchange solutions. Seventy-two percent of respondents agree it is very important that their advisor is independent of any exchange they are considering. Only 6 percent of respondents are not worried about the potential conflict of an advisor with an exchange.
Key Private Exchange Attributes
Important capabilities Employee communication support
Variety of plan options and designs
Level and transparency of fees
Broad network access
Cost of plan options
Ease of use
Experience & track record
Financial stability
In this year’s survey, experience and track record emerged as the key consideration of an exchange vendor, with 96 percent of respondents indicating experience was an important consideration. Respondents also placed increased importance on tools that aid in plan selection, with 85 percent of 2014 respondents saying it is very important, up from 70 percent in 2013. Respondents considering post-65 retirees exchanges agree, with 67 percent saying tools that aid in plan selection is an important exchange trait. For actives, additional important attributes include single sign-on (83 percent) and ease of use (98 percent), while 71 percent of respondents considering post-65 exchanges feel member satisfaction is important for private exchange selection. Transparency tools are also at the top of the list of important exchange features for fulltime actives, with 91 percent of respondents saying it is somewhat or very important. Heightened importance on shopping tools matches the HR goal of creating educated health care consumers and engaging employees so they are more accountable for health decisions. In addition to the shopping experience, 89 percent of respondents said the variety of health plan/carrier/network options was important. Sixty-five percent of respondents considering a post-65 retiree exchange agree that it is important to have plans from multiple vendors. Broad networks are still at the top of the list for full-time actives; however, this year interest in other networks grew. Seventy-one percent of respondents said availability of ACOs and new delivery models is important, up from 65 percent in 2013, and 48 percent agreed availability of plans with narrow networks is important. 2013 Respondents
2014 Respondents
Cost of plan design options
72%
76%
Administrative fee levels
87%
90%
Discloser of exchange fees and revenue
89%
90%
Attribute
But, the biggest consideration among employers remains cost. Over 95 percent of respondents agreed cost of plan design options, administrative fee levels and disclosure of exchange fees and revenue are key considerations of a private exchange. Those considering retiree
Though adoption may not have reached the expected targets in 2014, interest in private exchanges is still high. Some employers are hesitant to be first movers, and others are taking the time to evaluate exchange options.
exchanges are also concerned about cost, with 68 percent saying level of fees is somewhat or very important and 73 percent saying availability of low cost benefit options is important. Leveraging alternative networks helps drive costs down, and employers this year more than last are connecting the dots between network, cost and increased employee choice. Networks are currently one of the best sources of savings on exchanges.
Adoption Risks/Barriers While interest remains high, barriers to adoption still linger. More than 90 percent of respondents agreed that the immaturity of the exchange market is an adoption risk that employers struggle with. The survey revealed 88 percent of respondents agree the exchange administrator’s stability track record is very important. Regulatory uncertainty emerged as a bigger obstacle in 2014, with 80 percent of respondents indicating concern. Other barriers to adoption include employee readiness and loss of control / stewardship. When asked more specifically, respondents want to retain control of plan design, advisor relationships, carrier relationships and financing decisions (self vs. fully insured). These attributes were the top of the list, with over 70 percent of respondents agreeing that retaining control of those aspects was somewhat or very important. Those considering post-65 retirees also saw difficulty for retirees to use online enrollment tools and noted decision support as a barrier to adoption.
Results Though there is a long list of requirements for exchange adoption, early adopters have seen positive results around savings and employee engagement. While only 21 percent of respondents considering a private exchange for actives agree that moving to a private exchange will save the organization money (53 percent are unsure), the majority of implementers say they did save money, although 24 percent said it’s too soon to tell. Among post-65 retiree implementers, 71 percent agree retirees saved money by selecting lower cost plans. In addition to saving money, 60 percent of respondents agreed that full-time active employees valued having greater choice in health plans and benefit options, and employees are more engaged in understanding health plan costs. Seventytwo percent of post-65 retiree exchange implementers also agree retirees’ value having greater choice in health plan and benefit options. And, while use of technology and decision-support tools was deemed a barrier for retirees, 64 percent of post-65 implementers indicated that retirees did not have difficulty navigating through plan benefits and/or provider selection. Though adoption may not have reached the expected targets in 2014, interest in private exchanges is still high. Some employers are hesitant to be first movers, and others are taking the time to evaluate exchange options. The results of the Private Exchange Evaluation Collaborative’s second annual employer survey provide insight to employer’s requirements of and concerns with private exchanges. As we move beyond the early adoption phase, it will be interesting to see how the new models fair in this competitive marketplace. HealthCare Exchange Solutions™ I www.TheIHCC.com I First Quarter 2015
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Private Exchange
FORUM
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Rates starting at $395 for employers and $495 for brokers, consultants and health plans For more information, registration, sponsorship and speaking opportunities — visit www.PrivateExchangeForum.com today!