September/October 2014
Exchange
Beyond the Hyper-Growth What’s needed for private exchanges to succeed?
Due Diligence on Private Exchange Solutions Consumer Expectatons for Exchange Technology
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INSIDE
FEATURE 11 Beyond the Hyper-Growth: Looking at What’s Next for Private Exchanges In the middle of the first Open Enrollment season since Accenture consultants stated the private exchange industry was undergoing “hyper-growth”, we have once again gathered a panel of leading private exchange experts — representing a mix of brokerage/ consulting firms, health insurers and technology providers — to offer their insights into the state of the private exchange market. In this panel, six contributors cover prospects and early results for this year’s enrollment season, emerging trends to look for next year and key components private exchanges will need to fulfill employers’ expectations. With Patty Fontneau, President, Private Exchange Business, Cigna; Jean Moore, Managing Director, Exchange Solutions, Towers Watson; Mike Smith, Director of Exchange Solutions, Lockton Companies; Don Garlitz, Senior Vice President, bswift; Frank B. Mengert, Director of Technology, ebenefit Marketplace; and Nancy Scola Lombaer, Partner, Laurus Strategies.
7 Exchange Profile Consumer Expectations Will Drive the Top Private Exchanges of the Future Everyone agrees that we are in the very early acceptance stage for private exchanges. While the Affordable Care Act pushed public exchanges, Accenture projects more than 40 million employees will be using private exchanges by 2018. What will those 40 million employees expect when they are shopping for medical, ancillary and voluntary insurance products? They will expect to find selfservice that works. By Gaston Gage, President and CEO, Empowered Benefits
9 Private Exchange Checklist The Private Exchange Checklist: Helping Employers Conduct Due Diligence Employers are continuously being challenged by advanced health care delivery models,
DEPARTMENTS
brand-new marketplace health management options and recently issued compliance requirements. Organizations — whether private, public or not-for-profit — now also have a broader array of options when it comes to offering health care coverage to their employees. One of the newer delivery options available is a private exchange. However, it’s important to remember that not all exchanges are created equal, and it may not be the best solution for a specific organization.
across our industry as well. These dynamics have changed the world of commerce, forcing manufacturers and service providers to innovate. The advent of private exchanges will accelerate this consumer-centric shift in the employee benefits sector. By Mike Sullivan, Executive Vice President and Chief Marketing Officer, Digital Insurance
By Bruce Davis, Principal and Health and Group Benefits Practice Leader, Findley Davies
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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.
15 Private Exchange Trends The Consumer Factor: Four Elements to Consider with Private Exchanges We are living in an era of the consumer. Advances in technology have given individuals more power than they have ever possessed to access products and services that best meet their needs. Price elasticity models are being reconfigured
Publisher’s Letter
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Briefs & Innovations Keeping you up-to-date with the latest news, research and innovation in defined contribution and health insurance exchanges.
HealthCare Exchange Solutions™ I www.TheIHCC.com I September/October 2014
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PUBLISHER
Exchange www.theihcc.com VOLUME 10 NO. 5 | SEPTEMBER/OCTOBER 2014
Providing Employers with the Right Information on Private Exchanges
Published by FieldMedia LLC 292 South Main Street, Suite 400 Alpharetta, GA 30009 Fax: 770.663.4409 CEO
Doug Field @ theihcc.com MANAGING DIRECTOR
The past year has seen a sharp increase in adoption of health care consumerism strategies from all types of organizations, including many of the nation’s largest employers, brokerage/consulting firms and health plans. While the rise in health savings accounts, consumer-focused technology and price transparency have been duly recognized throughout the industry, of course, no single trend has been maligned or lauded quite like private health insurance exchanges.
Brent Macy 404.671.9551 ext. 103 · bmacy@theihcc.com CHIEF MARKETING OFFICER
Andrew Dietz adietz@theihcc.com MANAGING EDITOR
Jonathan Field SENIOR EDITOR
Looking back five years, when private exchanges were really in their primordial days, so to speak, the potential for this new benefits delivery model to substantially change the way Americans receive health insurance was clear. Long before the hype, companies like Liazon, Array Health and Bloom Health were building the future of employee benefits.
Heather Loveridge hloveridge@theihcc.com ART DIRECTOR
Kellie Frissell GRAPHIC DESIGN
Patrick Washington MARKETING COMMUNICATIONS MANAGER
At the time and particularly now, the core philosophy behind private health insurance exchanges was very tightly aligned with the philosophy of health care consumerism. By educating and empowering employees to be consumers of health care, employee satisfaction would rise, employee health would improve and companies would save significant sums on health care spend.
Lana Perry ASSOCIATE DIRECTOR OF EDUCATION SERVICES AND PROGRAMS
Dusty Rhodes CHAIRMAN OF IHC ADVISORY BOARD
Ronald E. Bachman, CEO, Healthcare Visions
As Gaston Gage opines in his article here, a good private exchange is essentially about providing employees with the same type of user experience they are already accustomed to in their daily lives through websites like Amazon and Expedia. A private exchange is not about employers discontinuing to sponsor health coverage or no longer caring about employees’ well-being. In fact, a well implemented private exchange — combined with the right set of tools and products — can considerably improve the employee benefits experience for all stakeholders. Misinformation about what a private exchange is or is not will not help employers make the appropriate decisions on employee health care moving forward.
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, Sanders McConnell, TSYS Healthcare; Roy Ramthun, HSA Consulting Services LLC; John Young, Consumerdriven LLC WEBMASTER
Tim Hemendinger DIRECTOR OF CONFERENCE SPONSORSHIP/ CORPORATE MEMBERSHIP/REPRINTS
Rogers Beasley
Through HealthCare Exchange Solutions, PrivateHealthCareEXCHANGES.com and the inaugural, upcoming Private Exchange FORUM in Dallas, we’re deeply committed to providing employers — and the stakeholders that support them – with all the latest up-to-date information on private exchanges so that they can make the right decision for their employee population, members or clients. In this issue’s feature, we have asked for insights from many of today’s leading private exchange experts on what to expect this Open Enrollment season and what key components exchanges will need to successfully provide a top-notch experience for employers and employees. As we begin to analyze the data from this year’s enrollment period and look to next year, I hope all of our readers find a wealth of useful information herein. Sincerely,
ACCOUNT MANAGERS
Michelle Gatehouse Ted Arvan WEST COAST BUSINESS DEVELOPMENT DIRECTOR
Mike Allen PARTNERS/ALLIANCES
Joni Lipson BUSINESS MANAGER
Karen Raudabaugh
™ Volume 10 Issue 5 Copyright ©2014 by FieldMedia LLC. All rights reserved.
™ is a trademark of FieldMedia LLC. ™ is published eight times yearly by FieldMedia LLC., 292 South Main Street, Suite 400, Alpharetta, GA 30009. Periodical postage
Doug Field CEO/Publisher dfield@fieldmedia.com
TO SUBSCRIBE: Make checks and money orders payable to ™ magazine 292 S. Main Street, Suite 400, Alpharetta, GA 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 PRINTED IN THE U.S.A. ™ is designed to provide both accurate and authoritative information with regard to the understanding that the publisher
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September/October 2014 I www.TheIHCC.com I HealthCare Exchange Solutions™
NEWS BRIEFS & INNOVATIONS
NEWS BRIEFS Maestro Healthcare Technology Acquires Leading Private Exchange Platform Maestro Healthcare Technology announced earlier this month that they have acquired Florida-based Workable Solutions from Alegeus Technologies. This strategic move strengthens Maestro’s unique benefit solutions with the addition of leading private exchange and billing capabilities. Combining the capabilities of Workable Solutions with Maestro’s integrated administration, medical management and consumer-driven payment solutions will create enhanced value by establishing an industry-leading, integrated platform designed to provide simple administration for employers and an easy-to-understand marketplace for consumers.
BCBS of Minnesota Launches Private Exchange for Employers Powered by Bloom Health Blue Cross and Blue Shield of Minnesota recently announced the creation of their private exchange solution, a “benefits hub” for employers with more than 50 employees. The hub goes beyond traditional health care offerings by including dental, life, disability and vision insurance — plus a vacation savings account — all in an online environment where employees can calculate, shop and purchase what is best for them and their families. The BCBSMN online marketplace allows employers to provide a defined contribution for their employees to use when shopping for their annual benefits. The exchange offers a variety of health plan designs on a spectrum of prices and networks.
Array Health Closes First Round of Institutional Financing to Accelerate Growth Array Health recently announced that it closed a $13 million funding round. Led by Noro-Moseley Partners, the round also included investment from Vocap Investment Partners. Healthcare Growth Partners represented the company in this transaction. Plans for the new capital include further investment in the company’s technology platform and accelerating growth to meet market demands. The company anticipates expanding its product development, sales and marketing teams. Founded in 2006, Array Health pioneered private exchange technology and ran multi-insurer exchanges in the Pacific Northwest before focusing on powering private exchanges for health plans.
AssuredPartners Launches Assured Options Private Exchange with Liazon’s Technology AssuredPartners Inc. has announced a new partnership with Liazon to launch Assured Options, a private exchange for clients of AssuredPartners. AssuredPartners will use Liazon’s platform to bring clients the Assured Options Exchange, which offers new health care options to organizations and their employees. The Assured Options Exchange is an online benefits store that is changing the way employers and employees buy benefits. Assured Options helps employers save money on their health care costs by setting predictable budgets while allowing employees to personalize their benefits package with a selection of health, dental, vision, life, disability and other benefits from top national and regional providers. Award-winning decision support and education helps employees make smarter benefits selections, and expense tracking tools help them manage and pay expenses yearround.
Aon Study Shows Early Cost Savings Aon Hewitt announced that employers and individuals participating in the Aon Active Health Exchange are seeing notable reductions in health care spend for the third straight year. More than 600,000 employees and dependents enrolled in health benefits through the Aon Active Health Exchange for the 2014 calendar year, and all 18 companies that participated in 2014 are returning to the to the exchange in 2015. Across the companies, rates for medical coverage increased an average of 5.3 percent. This is lower than the industry average and includes costs associated with the Affordable Care Act. According to industry estimates, average health care cost increases in 2015 for large U.S. employers with self-insured arrangements are projected to be between 6.5 percent to 8.0 percent.
Independence Blue Cross Launches Private Exchange for Mid- and Large-sized Employers Independence Blue Cross announced the introduction of a new private exchange that will offer medical, pharmacy, dental and vision to employers with more than 100 employees. Employers can begin to use the Independence private exchange immediately with coverage effective on or after January 1, 2015. The exchange allows employers to accommodate the diverse health care coverage needs of their employees through a range of plan options, while the guided online shopping tool gives employees the freedom to manage their own shopping experiences.
HealthPartners Launches Benefits for Me Private Exchange Solution with bswift Technology HealthPartners, the largest consumer-governed, non-profit health care organization in the nation, announced the launch of Benefits for Me, built on technology by bswift. This new private exchange solution enables employers to offer many health insurance plan choices to their employees, who can use the online tool to compare and choose the best plan for them. Benefits for Me can accommodate a wide variety of benefits offerings for employers with 51 or more employees using a defined contribution funding strategy.
ebenefit Marketplace Announces Partnership with ConnectYourCare ebenefit Marketplace, a leader in software and services for benefits administration technology specializing in private exchanges, announced that they have selected ConnectYourCare to provide a fully integrated health savings solution to be offered by ebenefit Marketplace. With this relationship, ebenefit enhances its existing services by integrating ConnectYourCare’s top-ranked CDHC platform to create a comprehensive product supporting employer demands for flexible, account-based benefit solutions.
Transitions RBG and ConnectedHealth Announce Partnership to Offer Benefits to Entire Population Transitions RBG, which provides innovative solutions for retiree benefit programs, and ConnectedHealth have partnered to expand current benefit offerings to each other’s clients. As part of the arrangement, ConnectedHealth will now make its Smart Choices™ Marketplace available to Transitions RBG’s non-Medicare-eligible consumers. These individuals will be able to shop and select among a variety of medical and ancillary insurance plans that best meet their needs. The new offerings will be available to clients and partners of both companies. HealthCare Exchange Solutions™ I www.TheIHCC.com I September/October 2014
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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,
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PRIVATE EXCHANGE PROFILE
Consumer Expectations Will Drive the Top Private Exchanges of the Future Exchange technology is consumer-centric BY GASTON GAGE » PRESIDENT AND CEO » EMPOWERED BENEFITS
Everyone agrees that we are in the very early acceptance stage for private exchanges. While the Affordable Care Act pushed public exchanges, Accenture projects more than 40 million employees will be using private exchanges by 2018. What will those 40 million employees expect when they are shopping for medical, ancillary and voluntary insurance products? They will expect to find self-service that works. Consumers expect ratings in product selection like Zappos, Sears and Northern Tool. They expect to see similar products like they find on Amazon, eBay and Staples. And they expect to find real product filtering like AutoZone or Cars.com where the result set may number in the thousands. Consumers expect to find meaning out of all the possibilities, and they expect to do it quickly. That is decision support. That level of consumer engagement can only be created by software firms who have deep expertise in making things easy for the user. The firms who pop up overnight don’t stand a chance to develop those tools simply by having a big marketing budget. Consultants and other companies entering the exchange space without a consumer software background have a very high barrier to success.
Usability is a Differentiator Empowered Benefits’ interface design expertise dates to a usability lab that we built in 1996. Our chief creative officer was instrumental in early online banking application interfaces for Wells Fargo and Bank of America. We designed interfaces for e-commerce stores that sold billions of dollars of retail products to consumers. We learned how to merchandise online with similar goods and services. We simplified patient portals and medical provider sites for hospitals, focusing on the patient experience. By the time we tackled consumer-driven health plans in 2001, we had a breadth of consumer Internet experience to leverage. Our BenAdmin customers got more than 30 percent voluntary product enrollment with no enrollers or call centers because of an application interface that was easy to understand. Our exchange platform started with a user interface and application flow that made the most sense for consumers. We developed business requirement documents and application specifications with that user experience in mind. This unique software development process guarantees that our online tools are understandable and easy to use.
Automated Enterprise Technology is a Requirement Consumers expect their exchange to be built on secure enterprise technology that works 100 percent of the time. The average consumer expects that from every website they use. True exchange expertise must be coupled with professional software development. We learned via BenAdmin that secure data feeds need to be built in a rules engine to automate the platform and remove customizations of the past decade of HR technology. If an exchange involves human interaction, then most likely it is a custom BenAdmin solution with a shiny new name. We leverage SaaS best practices for software development and have major quarterly functionality releases scheduled for the next two years. The platform has three different views that make it just as easy for brokers to manage all their groups as it is for HR admins to drill down on individual employees who need assistance. Empowered Benefits offers year-round communications for employees to compare benefits, review corporate initiatives and make sure they have their families in the correct plans. The platform is built on a proprietary content management system allowing HR administrators an easy solution for updating communications. The platform allows for products to be bundled on demographic, gender, age, price and other factors like conditions, medications or health care usage. Our decision support is integrated into the enrollment process and is based on analysis of the employee census data and our history of enrolling millions of employees. This allows us to provide a seamless user experience that produces real results — and even better, no one is forced to watch multimedia or interact with a cartoon character. We leverage Big Data to offer the employee what they want and expect — the ability to choose the products that are right for their families.
The Future of Exchange The Internet has already changed many industries. Health care and insurance products are next in line to make the transition. Just like 401(k) and financial services, the future of private exchanges will revolve around self-service, and as this space continues to evolve, the ones who will thrive are those who understand and deliver a superior consumer experience.
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Introducing
On Ramp provides you with everything you marketplace – one that integrates seamlessly even the most detailed nuances of individual brands, and intuitive enough to empower clients and users to select and enroll in the Visit Connecture at booth #311 to learn more about this powerful addition to your arsenal. When you stop by, be sure to register to win our Wellness Basket, which includes a Withings Smart Body Analyzer Scale, Fitbit Flex Wireless Activity + Sleep Wristband, LG Electronics Tone+ Bluetooth Headset, Blue
by
PRIVATE EXCHANGE CHECKLIST BY BRUCE DAVIS PRINCIPAL AND HEALTH AND GROUP BENEFITS PRACTICE LEADER FINDLEY DAVIES
The Private Exchange Checklist: Helping Employers Conduct Due Diligence on Implementing a Private Exchange
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mployers are continuously being challenged by advanced health care delivery models, brand-new marketplace health management options and recently issued compliance requirements. Organizations — whether private, public or not-for-profit — now also have a broader array of options when it comes to offering health care coverage to their employees. One of the newer delivery options available is a private exchange. However, it’s important to remember that not all exchanges are created equal, and it may not be the best solution for a specific organization. To determine if a private exchange will provide the right amount of flexibility, customization and affordability, Findley Davies provides an objective approach to help its clients conduct their due diligence with this checklist of important questions to ask before making a final decision. When helping clients conduct due diligence on the feasibility of using a private health exchange, we consider a number of issues and pose questions to the private exchange vendor, such as:
Flexibility 1. Do you enable the employer to select the provider network(s)? Can you vary the network by geographic region to ensure minimal provider disruption for members and long-term stability? 2. To what extent can the employer select exchange medical and pharmacy plan designs? 3. Do you offer the employer a choice among several PBM partners? 4. Can you offer ancillary benefits using the employer’s existing dental, vision, life and disability carriers? 5. To what extent does the employer control the offering of employee-paid, voluntary products, such as critical illness, accident or hospital indemnity plans? 6. Can the employer elect to self-fund the medical/pharmacy benefits delivered through the private exchange? 7. Do you permit the employer to continue “legacy” plans off the exchange? 8. Do you offer the employer a choice among several HSA banking partners?
Operations 1. How do you interface with the employer to acquire health benefit eligibility information? 2. How do you interface with the employer’s HR/payroll function to facilitate employee contributions? 3. How do you facilitate required PPACA reporting under IRC § 6055 and 6056?
4. Do you provide or offer through a contractor proactive member services? Are you willing to provide performance guarantees that address: t First call resolution; t Sufficient and timely access to live member services representatives; t Outreach to medical providers for additional/missing information; and t Communication tools to enhance employee knowledge, comprehension, employee engagement, consumerism and cost transparency (including use of social media). 5. How do you provide employers excellent, client-centered account management? Do you offer performance guarantees not only for successful, on-time implementation, but also fully satisfactory on-going service? 6. If the exchange medical/pharmacy plans are insured, how does the underwriting/renewal process work? How are large, catastrophic claims normalized? 7. How do you support an employer’s chronic condition management program? 8. What specific chronic condition management programs do you provide? 9. How do you support an employer’s wellness initiatives? 10. What specific wellness programs, resources and tools do you provide? 11. If self-funded, do you provide actionable claims reports with meaningful industry benchmarks to reveal cost trends and drivers? 12. Under your HSA options, do you have real-time connectivity with all PBM partners?
Compensation/Indemnification 1. If insured, are compensation arrangements automatically built into the exchange medical/pharmacy rates? If yes, what are the compensation arrangements, including base commissions and overrides? 2. If self-funded, what are the compensation arrangements? 3. Are you willing to indemnify and hold the employer harmless against causes of action relating to employees who allege they were not provided with sufficient choice or plans, or their plan did not have sufficient choice of providers or the plan was not of high quality? Are you willing to certify that at least one of the plans offered to each employee meets both ACA minimum value and affordability requirements?
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BEYOND THE HYPER-GROWTH Looking at What’s Next for Private Exchanges In the middle of the first open enrollment season since Accenture consultants stated the private exchange market was experiencing “hyper-growth”, we have once again gathered a panel of leading private exchange experts — representing a mix of brokerage/consulting firms, health insurers and technology providers — to offer their insights into the state of the private exchange market, including early trends from this enrollment period and what exchanges need to offer in order to live up to the hype next year and beyond.
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Beyond the Hyper-Growth: Looking at What’s Next for Private Exchanges
X-Factor – The Results Employers Have Been Waiting for Are Here BY JEAN MOORE MANAGING DIRECTOR, EXCHANGE SOLUTIONS, TOWERS WATSON
I’m happy to report that the wait-and-see season is over. With the results of private exchange pioneers hitting
more ownership by employees) and trepidation (the back for quality and health improvement and ownership headaches for employees). As one of the early participants in this new channel, proprietary private exchanges, we at Cigna have learned a few things that suggest how the private exchange can be a positive force for the future as another option for our employers-clients to choose from to achieve their
what outcomes private exchanges can deliver. early results from our private exchange for full-time active employees. Employers using Towers Watson’s OneExchange for their full-time
cost increases employers see year-over-year. Here are other trends emerging this season: Engagement and consumerism – The things that make employees better consumers on private exchanges: choosing from a variety of plans, spending funds wisely and using services and medications for optimal outcomes – also make them more engaged employees. Transparency – Another key advantage for employers is that the private exchange model really highlights how much employers
things are far less transparent. Mandate support – As we approach the new ACA reporting provisions that will be required in 2015, a private exchange platform
personnel for more strategic activities.
substantially different a year from now, given how quickly things are changing. Last year, two-thirds of employers we surveyed told us they weren’t considering private exchanges for full-time active employees. This year nearly two-thirds think private exchanges are now or by 2016 will be
In large part, Cigna’s success in growing our business is a result of helping employers create a culture of health that improves their employee health and health care costs, well-being and productivity. In doing so, our average total medical trend cost is among the lowest in the industry. So why change our approach? The answer is we will not. For us, the key to compete and win in this new arena is to offer our private exchange costs and productivity. introduced, many were concerned that CDHPs would provide a temporal employees to avoid needed care. And frankly, there are a number of plans that embraced this approach. But the ones that are winning are those that offer quality networks, a wealth of health improvement and wellness programs, cost and quality transparency tools and information and properly aligned incentives. Our view is the same will work in the private exchange market. While private exchanges can provide tools to help some employers regulate their health care costs to a more predictable levels, the Cigna approach advantages to employees: Choice of multiple medical plan options, several dental plan choices, vision and group life, accident and disability plan choices Cigna’s national, high quality Open Access Plus physician group, ACO and hospital networks A full complement of wellness, health engagement and disease management programs 24/7/365 service
One thing we’re hearing across the board from employers is “We’re and mobile app. business, so we want to do the right thing. When we make a decision, we want it to stand the test of time.” coming year, we look forward to seeing more employers choose an exchange strategy, with employee engagement and consumerism taking big leaps forward, as well.
Balancing Cost Savings and Benefits Advantages BY PATTY FONTNEAU PRESIDENT, PRIVATE EXCHANGE BUSINESS, CIGNA
As with most innovations in our industry, the advent of the private exchange has been met with a combination of enthusiasm (the hope of new options for cost-weary employers, more channels for health plans, 12
September/October 2014 I www.TheIHCC.com I HealthCare Exchange Solutions™
This is the formula by which the yea-sayers can prevail against the nay-sayers and create a viable and successful option for sustainable and productive private marketplace for years to come.
Exchanges Need to Focus on the Right Shopping Experience BY MIKE SMITH, DIRECTOR OF EXCHANGE SOLUTIONS, LOCKTON COMPANIES
The initial rollout of Healthcare.gov last fall was imperfect: site outages, long enrollment delays and overall consumer dissatisfaction. The new chief executive at Healthcare.gov, Kevin Counihan, announced an impressive stretch goal for the troubled
Beyond the Hyper-Growth: Looking at What’s Next for Private Exchanges service that users will, over time, become “raving fans” of the enrollment program and process. As consumers, we now have access to much more information for purchases than ever before. Think about how the process of buying a car has changed from an uncomfortable and frustrating “negotiation” to one where the buyer has all the necessary information to control the deal. less inclined to orient themselves around caveat emptor or “let the buyer beware.” In 2014, Healthcare.gov will introduce “window shopping” in the weeks leading up the enrollment period so that consumers can preview the plans that will be available to them. Unfortunately, consumers and employees consistently view the purchase of health insurance as a price-driven commoditized exercise focusing largely on premiums and deductibles. The Healthcare.gov site will not offer true comparison shopping this fall and will instead rely on the health plans and insurers for information regarding physician and hospital networks, prescription coverage, quality and wellness measures, etc. Fortunately, in the private exchange market, employees have access to many different, innovative and integrated decision support tools aimed at increasing engagement, cost transparency and plan selection on the path to becoming an active health care consumer. Private exchange technologies are doubling down on these investments as they build out services and look to differentiate themselves. However, once you’ve seen one decision support tool, you’ve seen one. Employers still control the decision regarding which exchange program to implement. These choices include approaches ranging from bundled services from brokers and consultants or a combination of some their organizations from the cultural to the practical. Should the exchange recommend a single plan or multiple plans? Can employees access these tools via mobile devices or the phone? How are vendors’ decision algorithms developed? Employers strive to change employees into true health care consumers. To create these “raving fans,” careful consideration of the shopping experience, decision support tools and end-to-end enrollment employee accountability and health care utilization.
Compliance, Wellness and Voluntary Benefits: Crucial to Private Exchange Success BY FRANK B. MENGERT, DIRECTOR OF TECHNOLOGY, EBENEFIT MARKETPLACE
Open enrollment is upon us again. As a private exchange solution provider for brokers across the
the board. To offset these costs, the growth rate of a lower-premium high deductible health plan is on the rise. Employers are still offering multiple plan choices for employees who wish to spend more money out of pocket for a richer plan but most employees have gravitated to the lower cost
illness coverage. of 50 percent in some cases. Tools included in a private exchange provide a great experience through recommendation technology and decision support for CDHPs and voluntary products, allowing employees to choose The hot topic these days has also been wellness. The number of programs that make it very easy for employers to implement and very easy for employees to participate in is on the rise. This has encouraged more employers to commit to a long-term plan of changing the health of their workforce. Most programs being adopted include biometrics and outcomes-based incentives along with smoking cessation and weight management programs. We see an increase in workplace challenges, getting everyone involved and having a team approach to participation. Incentives range from premium discounts and credits to awards and prizes. increase is compliance. Employers that have never had a system to track their employees are quickly realizing the clock is ticking with the ACA mandates and how they will have to report on their workforce. A private exchange makes it very easy to track data and produce those reports.
Private exchanges offer them exactly that.
Developing the Financial Long-term Business Case for Private Exchanges BY NANCY SCOLA LOMBAER, PARTNER, LAURUS STRATEGIES
When evaluating the feasibility of a private exchange solution, it is important for employers to consider a number of short and long-term factors. Some of these factors are employee focused; employers need to include competitive positioning in order to attract and retain high-performing talent and take care of the needs of current employees. However, businesses also need to ensure they organization — as well as its employees — for the long term. exchange solution, there are two provisions of the Affordable Care Act
in private exchanges but not many employers ready to As we enter into our second year of enrollments with our employer
tax and the potential expansion of the Small Business Health Options Program marketplace to large groups.
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Beyond the Hyper-Growth: Looking at What’s Next for Private Exchanges
The excise tax on high-cost health plans, commonly referred to as the “Cadillac Tax”, is scheduled to take effect in 2018. A key characteristic of most private exchanges is the ability to expand the number of health plans offered, which in turn may result in fewer participants enrolling in high-cost number of employees buy a plan that is of lower cost than the one they previously had vs. opting for a comparable plan or a higher-cost plan. This “buy-down” phenomenon helps alleviate the impact of any high-cost plan excise tax, but also may result in a cost shift to participating employees. Private exchanges need to encourage the insurance carriers, health plans and providers to make every effort to reduce the underlying cost and cost trend of health care by participating in payment and practice reforms like accountable care organizations and bundled payment arrangements, adherence to evidence-based medical practices, multi-disciplinary teams developing treatment plans, creating appropriate access to electronic medical records, etc.
Currently, individuals and small groups (over 50 or 100 employees, depending on the state) are able to participate in public marketplaces and SHOP. Starting in 2017, the SHOP Marketplaces are scheduled to expand to include employers with 100+ employees. According to a survey by late last year, 15 percent of employers are encouraging or will consider encouraging their full-time employees to obtain health care coverage in the public exchange before 2018. But more interesting with regard to the impact on private exchanges, the survey also reports that if employers are permitted to contribute toward employees’ coverage on the public exchanges in 2017 or 2018, 58 percent would consider doing so. The actual impact on the growth of these options vs. private exchange solutions will most likely depend on the size of the company – smaller companies in one or two locations are more likely to use the public exchanges than larger multi-state companies, the perceived stability and reputation of the public exchanges over the next few years, the ability to maintain employer tax deductions and employee pre-tax contributions, and in the most extreme circumstances, the prevalence of companies exiting health plan sponsorship all together, i.e., “pay vs. play”. These two ACA provisions will play a part in how employers develop their business case for or against the implementation of private exchanges. Much may still depend on the amount of change made to ACA
exchanges won’t grow in the longer term; we see an incremental adoption over the 2016 to 2018 time period and beyond. A common question is: “How is a private exchange different from what I’m doing today?” 1) “consumerism” — greater choice for employees, whether that be offering a range of medical plan designs and/or carrier/network choices or ancillary and voluntary plans; 2) a “retail” shopping experience with decision support tools to help employees/consumers make more informed selections; and 3) more standardized product offerings rather than each employer customizing plan designs. Many employers will adopt one or more of the above components over the next few years. Since there are several kinds of private exchanges, each with unique characteristics, employers are moving different populations into different solutions incrementally. Retiree exchanges serving the 65+ market have their own category as the most mature segment of the private exchange market. Exchanges serving individuals and part-time, COBRA-eligible or individuals being directed to the public exchanges to take advantage of subsidies. Our observation is that most employers are moving active employees into private exchanges incrementally, as they carefully consider when to introduce increased employee product choice, decision support tools, and/or standardized product offerings. One idea that’s been hyped — over-hyped in our view — is that employers want to “get out of health care” and move from self-insured to fully insured health plans. While this approach may appear to some employee market is that an employer group’s claims experience and risk is what will really drive their multi-year health care cost, whether one is fully insured or self-insured. In other words, there is no guarantee that health care costs will hold steady over a multi-year period simply because the plan is insured. Of course, an employer could decide to let the employees pay for any increases, but they could do that in any environment today, insured or self-insured. And there is a higher cost (in the range of six to 10 percent) to being insured. While some argue that carrier competition is the best way to bend the medical cost curve, we believe that narrow networks (including ACObased networks) — a new, less expensive option for consumers — and few years.
Employers and Private Exchanges: Trends, Definitions and Best Practices
If all health and welfare dollars are permitted to be allocated to medical, that’s where the money will be spent. And that buying behavior will have
BY DON GARLITZ, SENIOR VICE PRESIDENT, BSWIFT
earlier this year indicated that 18 percent of employers year for their active employee population. The actual adoption for January 1, 2015 is looking to be much less for mid-sized and large employers. But this doesn’t mean that private
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it where it makes sense and continue with traditional programs in certain lines of business. In sum, increased consumerism (meaning more choices for employees), engaging and thoughtful decision support tools and more standardized plans — including medical options with narrow or multi-tier networks — are likely to be three key trends affecting the active employee market for mid-sized and large employers for 2015 and beyond.
PRIVATE EXCHANGE TRENDS BY MIKE SULLIVAN EXECUTIVE VICE PRESIDENT AND CHIEF MARKETING OFFICER DIGITAL INSURANCE
The Consumer Factor: Four Elements to Consider with Private Exchanges
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e are living in an era of the consumer. Advances in technology have given individuals more power than they have ever possessed to access products and services that best meet their needs. Price elasticity models are being reconfigured across our industry as well. These dynamics have changed the world of commerce, forcing manufacturers and service providers to innovate. If we look outside the world of employee benefits, the transformation is epidemic. Customization has become de rigueur. There are pillow menus at hotels; myriad gluten-free, vegetarian and organic options at supermarkets — we’ve morphed into a nation of connoisseurs who order venti, half-caf, non-fat lattes. Just as the travel industry did years ago, more sectors are changing their supply chain processes and converting their business models from businessto-business to business-to-consumer. The advent of private exchanges will accelerate this consumer-centric shift in the employee benefits sector. Individuals and their family members can now select the combination of benefits that is right for their circumstances and budget. The days of one-size-fits-all is over.
the consumer at center stage. It also shifts more risk to individuals, who may need information and education to properly direct their choices.
1. Déjà Vu: Haven’t We Seen This Before?
3. Beware of Advisors Steering You Away from
2. Look Beyond the Software As employers sort through the confusion of a marketplace now teeming with private exchange options, consider that most — particularly those targeted to mid-sized and small businesses — involve variations in software. In many cases, the need to educate employees has been overlooked. While there may be abundant information available online, is it wise to put vital decisions about benefits — particularly health insurance — in an individual’s jurisdiction without having a knowledgeable professional hold their hand through the process? They once relied on their employer for expertise. That transfer of knowledge does not occur overnight. When exploring private exchanges, ensure the ones you consider have the manpower, bandwidth and resources to support a business-to-consumer relationship. At minimum, you should require call center support and online live chat capabilities.
For those unfamiliar with private exchanges, the concept seems foreign. Exchanges But the approach is almost identical to what happened in the 1980s with 401(k) Is your company’s benefits advisor recommending that you not explore plans. Once upon a time, many employers provided pensions to select workers a private exchange? He or she may have some valid points. The market is — a defined benefit. The company controlled the process and investment. The new, and it involves changing the way your business does things, which employee had no choice in the matter, can be uncomfortable. However, if you yet received a check each month after are interested in the cost control this At the moment, the vast majority of retirement. With a 401(k), employees approach provides, it may be worth businesses still want to participate in can contribute pre-tax earnings which a deeper look. If you turn to a private are often matched by the employer the benefits process, but they no longer exchange, how will this impact your — a defined contribution. How the advisor? There are few brokers serving want to own every decision. This puts funds are invested is determined by mid-sized and small businesses that the individual, not the business. The can sustain a profitable revenue stream the consumer at center stage. It also system has shifted as companies if their clients use private exchanges. shifts more risk to individuals, who have almost entirely migrated from They are seldom big enough to offer may need information and education to a program with the robust services an employer-based solution to one in which the employer frames the options required for long-term success and properly direct their choices. and conducts due diligence, then customer satisfaction, so they may turns the decision over to individuals steer you to other solutions. who determine the outcome based on personal preferences. Once employers feel there is a maturation of solutions in the private 4. Keep an Eye on Carriers exchange market, the benefits industry will again reach a tipping point. While Finally, here’s another thought: How will carriers be impacted by the rollout seems slow for those of us immersed in this every day, five years private exchanges? If they evolve as predicted, and consumers become from now the way employers, employees, carriers and brokers operate will be more engaged, then carriers will be pulled into the dynamic that completely different. And, 10 years from now, the system we’ve relied upon for now impacts benefits advisors and employers. They will be forced to the last 75 years will be unrecognizable. innovate. After years of operating with a model that targeted employers, At the moment, the vast majority of businesses still want to participate in carriers will have to compete on pricing at a consumer level. That could the benefits process, but they no longer want to own every decision. This puts be interesting. Stay tuned. The only thing constant is change. HealthCare Exchange Solutions™ I www.TheIHCC.com I September/October 2014
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