In the new world of "Obamacare," a.k.a. the Patient Protection and Affordable Care Act, the birth of the insurance exchange is propelling us all the way back to the future.
Rewind the tape and go back to 1978 when cafeteria plans were born, then fast forward the tape to 2013 and apply state-of-the-art technology. What do you have? An electronic cafeteria plan we now call an insurance exchange or marketplace, if we want to be politically correct.
There has been a lot written about insurance exchanges, both public and private. Let's talk about private insurance exchanges and how to evaluate them for your clients and your business.
All exchanges are not created equal. Many are not even really exchanges, they are benefit administration systems. Both offer value, but there are differences. So, how do you tell the difference?
An exchange creates an online marketplace and a shopping experience for the employer and the consumer. It includes a level of decision support, tools and resources to help the employer offer choices to the consumer. An exchange must provide defined contribution modeling tools to help the employer make educated funding decisions for its employees.
A benefits administration system is designed to help the employer digitize the "back room of benefits" with things like eligibility, enrollment, billing and collection, vendor data exchange, and usually payroll and carrier connectivity - but it doesn't necessarily create a shopping experience.
If you Google "private insurance exchange" you will find several definitions and a limited list of providers. It's a list that is growing every day. Identify your exchange candidates and develop a scorecard of attributes and capabilities that reflect your strategic objectives. What things are important to you and your clients?
Take the time to adequately research the ownership and the leaders of each provider. Here are some questions to ask yourself about them:
How well do they know the business? Is their model compliant with the ACA? How long have they been in business? Do they offer defined contribution modeling capabilities? Do they offer a broad range of carrier and product selection? What decision support tools are available? What administrative capabilities are included?
In most cases, you will probably end up with about 20 different categories of evaluation. Score those categories accordingly and your front-runners will emerge.
Before you make your selection of a platform partner, talk to a few references like employer clients, carrier partners and broker and consultant partners. Be sure to take the time to do your due diligence just as you would any other strategic partner - making the wrong choice could threaten your business.
Exchanges are here to stay and represent a new way of connecting people to insurance. If you embrace the trend of defined benefit to defined contribution, find the right partner(s) and ask the right questions - a private insurance exchange might just open up all kinds of possibilities for your clients and for your business.
Gaunya, GBA, is principal at Methuen, Mass.-based Borislow Insurance and an EBA advisory board member. He can be reached at (978) 689-8200 or email@example.com.
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