The business benefits of private exchanges are starting to be realized by insurers and brokers alike, with an increased focus on voluntary products, savings for insurers and a reliance on brokers.

More than half (52%) of respondents to an Array Health survey have seen a reduction in administrative costs while 48% have increased their market share if they offer a single-carrier private exchange. Of those that plan to offer an exchange, more than half (55%) expect a reduction in administrative costs will be among the benefits, followed by increased revenue (45%), and increased market share (43%), the survey found.

This year the survey by Array, which powers private exchange, shows that the private exchange market is becoming more mature and more than a “nice to have,” says Array Health’s CEO Jonathan Rickert.

Also see: Below trend cost increases prove private exchange staying power, Aon says

According to the survey, 59% of respondents believe the availability of ancillary products will lead to an improved consumer shopping and enrollment experience on the exchanges, but nearly half (47%) indicated that less than a quarter of private exchanges will offer a robust and comprehensive set of ancillary products by 2016.

Rickert says he was intrigued that private exchanges are not offering these products. “Part of that is the ancillary market is still really working to put their products up on these exchanges. We are getting a ton of interest to use this, which is taking some time,” he says.

But Alan Cohen, co-founder of private exchange company Liazon, which was acquired by Towers Watson, says he is seeing a high uptake in voluntary on their exchanges. The very first client to use Liazon’s Bright Choices Exchange offered 10 different benefit options, including programs traditionally thought of as voluntary, such as long-term and short-term disability, accident, and life insurance.

With close to 1,000 current clients, 99% offer something you would call voluntary, Cohen adds. “We see massive adoption in the things you would typically call voluntary,” he adds. “Almost every one of our clients offers products you would think of as voluntary.”

The most popular product offered on Liazon’s exchanges is health, followed by dental, disability insurance, short-term disability, life insurance, vision, accident, critical illness and then pet insurance, with 9% of people who use Liazon’s Bright Choices exchange buying pet insurance.

Sales channels

The survey also found that for plans with a start date of Jan. 1, 2016, 75% of organizations will be using a broker to sell the products, with 79% saying they would be using direct sales.  Further, 67% said they would be using the sales channel of a single-insurer private exchange and 48% a multi-insurer private exchange.

Also see: Private HIX targets part-timers, non-group eligible

“Brokers today are participating in a variety of different [exchange] models as we are seeing health insurance continue to get more and more complex with the changes of the Affordable Care Act, rising health care costs, all sorts of new innovation, and coupled with expectations from consumers,” Rickert says. “It has created a big opportunity for brokers today to help navigate all this choice.”

Multi-carrier exchanges are simply aspirational for the vast majority of companies in the United States, since those exchanges are for large employers, Cohen says. “We have a vast array of single carrier and multi-carrier offerings. For us the balance of what we are seeing is single carrier because most companies in the U.S. are [smaller.]”

 “I think the market will evolve over time,” he adds. “This year, [there were] some multi-carriers for smaller companies. The midsize and small market is still dominated by single carrier.”

Cohen says there is some desire for health plans to do more direct business but he is not seeing it as companies “still value their employee benefit adviser, be it a broker or consultant.”

story updated June 1, 2015

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