Gallagher Benefit Services' recently announced partnership to launch a private health insurance purchasing exchange is the latest seismic activity shaping winners and losers in an ever-evolving market.
The benefits arm of insurance giant Arthur J. Gallagher picked Liazon Corp. to offer the Bright Choices Exchange, a private model allowing clients' employees to choose from among 15 different types of products, creating a benefits package unique to their needs.
Employees can choose from health, dental, vision, life and disability coverage, among other benefits, from more than 30 national and regional providers. Some clients also include financial products, officials report.
"The exchange helps employees design a personal portfolio that is specific to their needs and budget to where they want to go in life," says Alan Cohen, chief strategy officer for Liazon and co-founder of Bright Choices. "Everyone can have something different."
Though Bright Choices is also available and being marketed to other, independent brokers, Gallagher's sign-on is significant in a private exchange market with competitors such as ADP, Aon Hewitt and eHealthInsurance.
Analysts say it appears private exchanges are emerging as the preferred vehicle of employers to get to defined contribution funding for health benefits. A JD Power survey found 47% of employers are leaning in this direction, will a study from Booz & Company showed more than 70% of employers said they would prefer a private exchange to a public one.
Reasons cited by the Booz respondents included greater product choices, design flexibility, customer service, and a general wariness of government-run entities.
"This is a trend that will continue to grow," says Rob Lieblein, executive vice president of consulting firm MarshBerry and an EBA Advisory Board member.
Developing a "private exchange is a way to protect an existing book of business but also provides opportunities and innovations to clients going forward," says Lieblein.
He thinks the industry will see more firms set up private exchanges, both national firms as well as regional ones and partnerships of independent agencies.
Some employers worry, however, that moving to a private exchange with pure defined contribution funding could hurt employee recruiting and retention.
It remains to be seen if Gallagher's market play could benefit from lessons already learned by Liazon.
Pre-PPACA
Five years ago, Cohen's Liazon team had the idea that employers should set a budget - how much money they want to allocate for benefits - then plug their employees into an online store where participants can buy the benefits that are right for them.
Bright Choices Exchange "pre-dates the glimmer of the health care reform debate," says Cohen.
"Liazon signed up for the single purpose of providing what now has become private exchanges, although in 2007 people in the industry didn't call it that in the beginning," he adds. "An exchange was where you bought soy beans."
Cohen says he and his team walked around Washington, D.C., showing people the model during the health care reform debate and afterwards. "Politicians would see it and say, 'See, that's an exchange, that's what we were talking about.' Although they were talking about exchanges they had never seen one," says Cohen.
A new partnership
Today, "We've selected a proven, comprehensive solution in the Bright Choices Exchange - one that is easy to deploy, easy for the employee to use and built on outstanding technology," says Sean Schubert, VP of sales and marketing strategies for Gallagher Benefit Services.
He adds that GBS talked with different platforms and numerous insurance companies to "get a feel for what the market looks like out there and who is really the best in class."
Now live, GBS is introducing the private insurance exchange to selected markets around the country, "and then we will expand from there," says Schubert.
GBS plans to market to employers first by educating them about how the exchange operates, what it can allow them to do, "how it may fit with their business strategy and then conversations go from there into what is the next best course of action for that organization," says Schubert.
With customers looking for ways to keep health care costs down, "they want innovative ideas to help them continue to compete in their respective marketplace and in particular be able to recruit and retain key talent that they need to move their business forward," he says.
Liazon's Cohen adds that the company is proud to have been selected by GBS. "We're excited to bring our services to their clients and prospective clients."
Marketing the exchange
Liazon's initial strategy was to distribute directly and convince employers a defined contribution approach could work. This proved to be a good idea, Cohen maintains.
"We thought that we really had to prove that this idea of defining the amount of money and allowing employees to shop for benefits could save companies and employees money while making the participants happier," says Cohen.
"We feel we've proven that over the last four and a half years, since we had our first Bright Choices Exchange client. Now our goal is to partner with insurance brokers and benefits consultants like Gallagher Benefits Services where we can provide our services to their clients."
Independent agents interested in accessing Bright Choices Exchange will be able to do so, Cohen explains.
"Liazon is working with a number of brokers across the country to make the Bright Choices Exchange available to businesses nationwide. Brokers must be selected and trained by Liazon as a certified distribution partner before offering Bright Choices to their clients," says Cohen.
Participation
The private exchange can be used by employees who work for small-, mid- and large-sized employers.
"We have 2,200 employers that are using the exchange. They range two employees to clients that have thousands of employees," says Cohen.
"We feel, as does Gallagher, that the exchange is something really applicable to small customers because it's ready to go, but also something they can bring to their largest customers," says Cohen.
Since it's a full benefits exchange not just health insurance, Cohen and his team feel that just having health insurance is "frankly wrong-headed because employees need to think about all their risks in life and has to have the right combination of programs to meet those risks."
"Employees can use the money to buy what's important to them," adds Cohen. "So they can get great value out of the money instead of it being spent on something they may not want they can tune it to exactly to meet their needs."
Cohen and his team find that employees who choose their benefits are more satisfied, happier and they feel in control.
Decision support
Cohen says the heart of the system is the decision support. "It is something that exists no place else," he says.
The process is simple, he explains. "First, each person goes online to answer a series of basic questions and then receives a full recommendation for exactly the plans and programs that meet the needs employees have identified."
Also, Cohen says the technology used in the exchange is as equally important.
"We've built a very robust, best-in-class technology, that allows the employee to log in, learn all about the products and really learn to be a good consumer," he says. "Next, they go through an advanced consumer support system that really ascertains their health and wealth, asking what their goals are."
Cohen says the exchange also takes into consideration their feelings, such as level of risk tolerance, and identifies how employees can manage their own health.
Lastly, the system will recommend for each employee the combination of plans and programs. This could come from 15 different products to create a package tuned specifically to an employee.
Cohen says that 70% of participants take the systems' recommendation but for those less comfortable completing everything on line Liazon offers a call center staffed by advisers.
Liazon's advisers are defined on their website as insurance specialists who are familiar with all the programs and plans.
Advising employees
The advisers are all licensed although they don't sell insurance.
"We specifically train our call center staff to not think about themselves as selling insurance but rather to take it upon themselves to answer questions," he adds. "They go through an intensive training process at Liazon to really learn all the ins and outs of all the programs that are available."
Cohen adds that there is an optional service where the call center can be available all year round to help those with any issues they may have with plans they selected.
"Our partner sales team is reaching out to top innovative brokers through existing relationships," says Liazon's Cohen. "In addition, we are receiving dozens of inquiries from brokers and GAs every week.
"The market is moving quickly, and innovative brokers are actively looking for a private exchange solution," he adds.
Planning Public Exchanges
Soon to be competition for the private market, nearly one-third of states have made moves to open public exchanges by 2014, as required by health care reform. At press time, 15 states plus the District of Columbia have established state-based exchanges. Here is what is set up so far, according to the Kaiser Family Foundation:
State Exchange Structure Contracting type of exchange Governance
California Quasi-governmental Active purchaser 5-member Board
Colorado Quasi-governmental Clearinghouse 12-member Board
Connecticut Quasi-governmental Active purchaser 14-member Board
Washington DC Quasi-governmental Active purchaser 11-member Board
Hawaii Non-profit Clearinghouse 15-member Board
Kentucky Operated by state Not addressed 11-member Board
Maryland Quasi-governmental To be decided by Board 9-member Board
Massachusetts Quasi-governmental Active purchaser 11-member Board
Nevada Quasi-governmental Not addressed 10-member Board
New York Operated by state Not addressed NA
Oregon Quasi-governmental Active purchaser 9-member Board
Rhode Island Operated by state Active purchaser 13-member Board
Utah Operated by state Clearinghouse NA
Vermont Operated by state Active purchaser 5-member Board
Washington Quasi-governmental Not addressed 11-member Board
West Virginia Operated by state Not addressed 10-member Board
