Uncertainty often leads to inaction. Change brings opportunity. We have moved from a time of uncertainty to a time of change. Prior to the SCOTUS decision and the November election there was considerable uncertainty, much of it due to an expectation (and desire for many) that PPACA would not survive intact. Those expectations didn't materialize. Now, change is inevitable.
One area of considerable opportunity related to change is coalescing around the concept of private health insurance exchanges. Larger brokers have already established their private exchange strategies. Many vendors have built or refactored their software to address private exchange requirements. Since the election, interest in private exchanges has intensified. My sales team talks to brokers every day and we are getting inquiries on private exchanges every day as well.
Employers are driving this increased interest in change. They feel compelled to make a pay-or-play decision. Fundamentally, they don't want to send their employees to a public exchange, but their need to control health care spend has them considering different avenues. And private exchanges in conjunction with a defined contribution facility may be the middle ground between the status quo and public exchanges. Why now?
We have been through a similar transition with retirement benefits. Employers understand this too and are looking for the transitional models. Moreover, because PPACA has heightened the awareness of both employers and employees/consumers about health care reform, we are in a time where change is expected, whether welcome or not. Employers haven't acted in the past because employee satisfaction with employer-based coverage is high and employees have certain expectations. So how can we help employers that have reached the tipping point on health care spend sell the benefits of a private exchange to their employees?
The primary benefit is the wider variety of plan choices available in a private exchange. One thing about American consumers is we like and prefer a lot of purchasing options. Currently 83% of employer-based health care programs offer only one or two plans, typically from the same carrier. In a private exchange the number of plans and carriers will be significantly increased.
Second, consumers like certainty too. And defined contributions bring certainty not just to employers, but to employees as well. Essentially, transparency of employer health care spend gives each employee a budget to work with. In a private exchange an employee can control their purchases to fit their needs more easily when there is a wide variety of choice. Additionally, portability becomes an option they never had with traditional employer-based coverage, albeit limited to employers within a given exchange.
Seizing this opportunity means that brokers must act now. It is a classic case of matching user (employer and employee) requirements with the available technology. But brokers must have a clear vision of what a private exchange is. Seems like I hear a new twist on the concept with each broker I speak to. Clarity is important. Action is important. And brokers are, by far, in the best position of anyone in the industry to bring all parties together to help employers in this transitional time.
Lamb is VP and group head of the EbixBenergy business unit at insurance software company Ebix Health. Reach him at firstname.lastname@example.org.
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