Not All Private Exchanges are Created Equal Know the Advantages, Know the Stats, Know the Features E mployers are increasingly embracing private insurance exchanges. Why? Find out about the advantages private exchanges bring to the health reform table, what features you should consider when aligning with the right one for you and your business, and important eye-opening stats.
3 ADVANTAGES JUST THE STATS 8 10 IMPORTANT FEATURES 2
PRIVATE EXCHANGES: ADVANTAGES Private exchanges are marketplaces created by private organizations offering health insurance and ancillary benefit products to employer groups and individuals. Employers purchase health insurance through the private exchange, and their employees can choose a health plan from participating carriers. They re part of a big change that employees nationwide experienced this year during open enrollment season. The new ways of choosing health insurance came about due to new rules under the Affordable Care Act which require companies with 50 or more full time employees to offer affordable health coverage or pay a penalty. Private exchanges are not a result of the Affordable Care Act (ACA) and they aren t run by the state or federal government. They are a model that employers can consider for offering health insurance to employees, however. 3
Early predictions show that the private exchange sales channel could potentially upend traditional group markets, as well as command attention among public exchange shoppers. Some reports forecast that enrollment in private exchanges could not only meet, but exceed, enrollment in federal and state exchanges in the next several years. These predictions say that by 2017, private exchanges will have gained enough momentum to equal public exchange enrollment and that this momentum is so significant that by 2018, private exchange enrollment will exceed public by 10 million members. Private exchanges also offer a viable sales vehicle for brokers both in the group and individual markets. With a predicated 8-18 million (quite a range, we know) lives covered by 2017, the biggest saturation of enrollees resides in the small- to mid-group market (50-199 employees) according to a recent Booz&Co. report. The report also stated: Health insurance in the U.S. is at the cusp of a major transition from an employer-driven payor model to a model directly involving many more employees and consumers. Private health insurance exchanges with a defined contribution approach represent a significant step toward catalyzing this change. For decades, U.S. companies that offer healthcare benefits to employees have stuck to a defined benefits model, in which the company offers a standard set of health benefits and shoulders most of the financial burden and risk of healthcare cost. 4
Over the past decade, this model has come under increasing strain as healthcare costs have more than doubled, creating an affordability crisis for employers. Now the problem has reached a tipping point. Some employers are considering a paradigm shift to their health benefits strategy that s akin to the transition from pension plans to 401(k) accounts: switching from defined benefits toward a defined contribution model. Instead of designing and offering defined health benefits, companies make cash contributions to savings accounts that employees use to purchase insurance products of their choice. This model allows the company to cap its healthcare cost at a desired threshold, improving control of current expenses and future liabilities. In addition to the affordability problem, the employer-sponsored insurance landscape is also being altered by healthcare reform, particularly the establishment of the individual mandate and public health insurance exchanges. Intermediaries, such as midsized employer groups and independent benefits consultants, see an opportunity to strengthen their role in the value chain by offering solutions that help employers of all sizes control costs. 5
Private exchanges are valuable in several significant areas. Unlike public exchanges offered by federal and state governments, they are flexible and can be customized to meet the needs of any employer group. And, private exchanges can offer a wider range of products, such as a wider array of dental, vision and life insurance. Private exchanges offer a consumer-driven experience which supports employer group preferences of employee retention and satisfaction. They reduce burdens associated with traditional benefits administration including group and plan management, billing, and open enrollment, as well as other advantages, including: Less risk for the employer as future increases in health care costs is transferred to the carrier, if an employer moves from a self-insured to a fully insured arrangement Simplified employer administration Increased choice for employees Improved cost awareness for employees Transition to a defined contribution model (an affordable alternative to employer-sponsored group health insurance plans) User-assistance tools to increase benefits and insurance transparency as well as health literacy 6
Employee -Uses employer contribution to select insurance products that best meet employee needs Employer Does -Contracts with private exchange -Sets defined contribution -Selects products to offer employees -Gains convenient access to additional health and wellness products for one-stop shop Private Exchange -Marketplace of health insurance products supplied by participating payors - Marketplace potentially enhanced through other insurance and non-insurance retail products Employee Gets -List of members enrolled in each product -Employer/employee contribution levels to manage payroll deduction - Single Bill for all group products purchased through the exchange Administration Support -Call center -Web chat -Retail store Another upside of private exchanges? Health and wellness coaching programs that are very popular with employees yet sometimes fall by the wayside because employers struggle to fund them in addition to health insurance can become a great use of the money saved by private exchange defined contribution health plans. Through these programs, employers can provide incentives to engage employees in health promotion and behavior change. And that s good for employees and employers alike! Healthier employees equal a reduction in health care costs. 7
PRIVATE EXCHANGES: JUST THE STATS The stats don t lie. Private exchanges are emerging as real contenders in the health reform landscape: Forecasts predict that private exchange enrollment will usurp public exchanges by 2018. Public vs. Private Exchange Annual Enrollment Public Exchange Private Exchange 40m 15m 27m 19m 30m 30m 31m 9m 9m 1m 2014 2015 2016 2017 2018 The private exchange channel is forecast to account for up to 18 million lives enrolled by 2017. A report by Accenture, a consulting firm, estimates that one million people will enroll in private exchanges in 2014, but that number could grow to 40 million by 2018. 8
Active Employee Private Exchange Market Size 2017 140M Defined Contribution Uptake Employer Size 5,000+ 5-10% 1,000-4,999 200-999 50-199 5-10% 8-18M (7-12%) 10-15% 10-15% Total Employee Market 2017 Private Exchange Market 2017 (2013 Market Size: <1M) 9
PRIVATE EXCHANGES: IMPORTANT FEATURES So which private exchange right for your clients? Which one should you align with to capture this growing segment of the market? Consider these factors: ENROLLMENT SUPPORT A Carnegie Mellon study found that only 14 percent of participants could actually understand and identify fundamental, basic insurance features and terminology, such as deductibles, co-pays, co-insurance and maximum out-of-pocket expenses. The majority of consumers simply do not have a clear or comprehensive understanding of how benefits work or about key terminology that surrounds most insurance plans from medical to ancillary. And these are the people who consider themselves primary or secondary health care decision makers in their families. When consumers shop for a car, for example, they generally know the features they want and understand what they re buying. But, when it comes to selecting health care insurance products, consumers just aren t as savvy. Traditionally, human resources departments or insurance brokers have been readily available to help choose and assist in making this very important decision. The paradigm shift with health care reform will affect many from the type of doctor they see to what coverage best fits their needs. 10
With the emergence of private and public exchanges, many consumers are being moved from a hand-held, consultative, in-person open enrollment experience with a broker or HR representative to a self-directed online enrollment. They re used to having someone available to walk them through the plans and help them understand the benefits. Being moved to an online shopping experience, however, will undoubtedly create confusion for consumers about selecting the right plan for their needs and budget. This is why support tools such as videos and educational materials are going to become critical to employee satisfaction, as well as to the success of exchanges in the eyes of the consumer. Keep in mind that finding a private exchange that offers support extends beyond educational support. The content that s presented should be authentic, transparent and create an approachable experience for the user. Private exchanges that create a warm, inviting and friendly online experience provide a sense of familiarity and comfort to the user. And as you well know, employee satisfaction trickles up to group satisfaction and retention. THE BELLS AND WHISTLES A private exchange s features are a top priority. You re going to want to find a system that provides a high level of service, and that has many tools and features, both for brokers AND groups and employees. 11
Some exchanges can be one-sided (great tools for the customer, but really don t factor in the broker relationship) or those that are broker-friendly but don t provide much in the way of customer support and enrollment educational tools. These ultimately drive group and employee satisfaction. Find a balanced platform one that supports the critical broker relationship and also provides tools for HR and employees to manage their benefits, as well as answers the many questions they will have during online open enrollment. Single source billing is a great feature to look for in your search, too. TECHNOLOGY Technology plays a significant role in the private exchange platform. As much as technology is driving almost every other industry, it is also impacting health care. System flexibility and personalization features are no longer optional to the digital customer: they re expected. As we see technology advancing, we will see our choices and connections improve from a desktop to a Smartphone. 12
From a consumer standpoint, providing a clean and easily navigated site is important. Private exchanges should be more than just a website. As a benefits broker, you ll need to look at how well each private exchange planned for how the user will complete tasks and if those tasks are intuitive. Of course, data security is also critical. Private exchange platforms should be sensitive not only to the regulatory mandates, but to expectations of the consumers regarding their health information security. You should find out their security processes and go with the one that has the best accreditations and certifications for quality management. While continuing to navigate health reform, keep these points in mind as you research private exchanges and begin to align yourself with the best one for you and your business. www.solsticebenefits.com 13