Fidelity launching a private health insurance exchange was a logical step into a growing marketplace with room for many more players as retirement and healthcare services continue to converge, according to industry insiders and the executive in charge of this new venture. The move also is expected to cast a brighter light on exchange solutions in broker-client conversations.
It should “propel the private exchange market forward” because of low barriers to entry and “the idea of linking health and wealth is now so obvious,” explains Barbara Gniewek, a principal in the health care practice of PricewaterhouseCoopers who oversees the Private Exchange Evaluation Collaborative. And with several nontraditional exchange operators now serving this expanding space, she believes “it puts pressure on [brokers and consultants] to step up and do that as well.”
A service provider known for retirement offerings expanding into healthcare clearly indicates a melding of physical and financial wellbeing in employee benefits, observes Lynn Dudley, SVP of global retirement and compensation policy for the American Benefits Council in Washington, D.C. “You start to think about people more holistically,” she says.
Even Congress once considered more than a decade ago the possibility of creating funds within 401(k) plans that could be used to purchase healthcare, she adds. One analyst told Bloomberg that Fidelity could use the exchange to draw high deductible health plan participants to its investment products and services.
Given Fidelity’s extensive experience in recordkeeping and working with employers of all sizes, “it’s a natural place for them to take their business,” according to Dudley. She says there’s always room for more entrants in the private exchange market.
More to come
Fidelity Health Marketplace offers small and midsized businesses a one-stop-shop for employee benefits. Services include an extensive network of national and regional medical, dental, vision and life insurance benefits, as well as wellness tools and programs and tax-savings options. The exchange platform already has been tested in Massachusetts and New York, and soon it will be available in California.
“We’re not the first financial firm to enter this space, and I don’t think we will be the last."
“We’re not the first financial firm to enter this space, and I don’t think we will be the last,” predicts Joe Laurin, who runs the exchange and believes “there is a lot of runway for many industry participants.” Noting how large employers have been benefiting from similar models for more than 20 years, he says the exchange will help employees of smaller businesses, who make up more than half the nation’s private sector workforce.
Fidelity Investments, the nation’s No. 2 mutual fund company, handles retirement accounts for more than 18,400 small and midsized employers. Included in the mix are health savings accounts from 420,000 individuals, though these account balances represent a tiny share of the $5 trillion in customer investments.
