Much of the focus on private exchanges has recently centered on small companies. In January, Fidelity launched Fidelity Health Marketplace, a private benefit exchanged specifically geared to its small- to midsized employer-clients. And consulting firm Accenture released a report recently that pegged the exchange growth rate at about 35%, with companies employing 100 to 2,500 people fueling much of the expansion.
But there’s a new player focusing on the large employer market.
Denny Weinberg, Hixme’s CEO, talked to EBN about the platform and why he believes individual ownership is the future of employee benefits.
How does Hixme work?
Our customer base is large employers. Five hundred to 5,000, or even larger, but our target market is 500 to 5,000 employees. Generally self-insured [employers with] employees scattered around the country, in some cases around the world.
What we do is provide a technology pathway for those employers [to go] from a group structured insurance core to the individual market, for health and for all the other benefits – it’s [still] employer-paid [and] employer-structured.
"Our technology deals with all the mechanisms to provide the employee the transition in shopping and surface experience of moving from a certain limited set of group benefit choices to local, personally owned choices for their benefits."
Our technology deals with all the mechanisms to provide the employee the transition in shopping and surface experience of moving from a certain limited set of group benefit choices to local, personally owned choices for their benefits. Our technology manages all funds flow between hundreds of carriers and thousands of benefit plans.
That’s the core of the model. It’s very different than anything a large employer would have done previously. It allows that employer to give their employees access to this gigantic retail market.
So the benefits are still employer-paid, but employees are going to the individual market to buy insurance with their employers dollars. Is that correct?
That’s correct. What they’re buying is not from the public exchanges, they’re buying directly from carriers.
Employees struggle sometimes even with the limited choices they do have within their group plan, so what makes you think that employees are going to embrace this? How do you deal with choice paralysis?
Every private exchange deals with that issue because there’s far more choices in the market. Especially when you get to the consumer market, there is an overwhelming number of choices for people who really only want to see two or three. One of the reasons this works in our market, and it’s a struggle for those who just sell on the individual market alone, is all of our employees are coming from a group plan and we know that group plan. We’re already the administrator of the conventional group plan before this occurs. So, one of the things we give them as their first option is, “Here’s the individual plan in your city that’s the most like the plan that you’ve got today.”
We can do that because we structure both ends of it. Our algorithms that bring the choices up for any one employee, the first thing they’ll see is the thing that’s closest to [what they chose] last year. Then we’ll give them options around that. [The system will ask questions like] “Would you like options that have a little bit more, or something a little less of something, a little higher price, a little lower price.”
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So like everybody else that uses these user-behavior-based algorithms that look at the interests and the intent of the buyer, you try and personalize what you present to them. [It’s] very much based on what that particular employee’s interests are. Everybody’s looking at something different.
This is a new world. This problem you talk about is getting solved little by little with great behavior-based technology. We think we have one advantage in that we already know what they have. We can give them exactly what they had last year if that is what they feel safer as a first step, then maybe in the next renewal or the renewal after that, they might be much more value discerning.
Are you operating now? When did the company start?
The company began in 2014. Our first customer sales were all through the year last year. We were very careful, very focused. We’ve had about a dozen large employers that we represent today. About a quarter of them migrated to the individual platform on Jan. 1. Others that we sold last year are in the process of planning their migration during this year.
At the same time we have staffed group reps all across the state of California, which is where we are beginning, with companies headquartered here in California. From literally border to border we have state territories filled and we’re calling on the roughly 2,000 large employers in California. We have modeling tools that present this to them, show them on a what-if basis what would happen if they were to make this change. We’re active and by the end of this year we open up two more states and then two additional states every year for the next five years.
So this model is only for employers who decide that they want to go this defined contribution route. Is that a fair assessment?
That is the only thing we do. When we model this out for [employers] they say, “Wow, this is really good, but it’s going to take us a couple of years to do this. Can we do this division by division, or geography by geography, or do our salary people first and our hourly people the next year?” We will gauge employers in that way. That’s very typical. So we are always running a business here that’s a traditional large-group consulting business. At the same time a very, very high volume of individual business, all integrated together. We're kind of a hybrid.
Why should employers be interested in this?
When you stop and think about the overhead associated with larger employers with redesigning an entire employer health plan every year – the restructuring the data, designing benefits, getting stop-loss coverage – that all goes away when you allow your employees to simply buy plans that already pre-existed. They’re already put in the market for this purpose.
One of the things we tell employers is it’s going to save you enormous amounts of hassle and costs. You don’t have to have a group bill anymore. You don’t need to worry about COBRA when your employees leave. They’ve already got their own plan. You don’t have to buy stop-loss insurance. These are big costs and big hassles. You don’t have to go through this annual cycle of redesigning your benefits for 3,000 or 4,000 employees. Your employees get to participate in a pool that has about 20 million people in it – the largest, most stable pool in the United States right now.
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The other thing [employers] say is, “Well, why won’t this cost me more, won’t these plans be lousy?” Of course, because of the Affordable Care Act, these individual plans have the same essential health benefits the group plans do. They look much more like it. Surprisingly, they’re a lot cheaper. Employers and employees both, who make this transition, actually save a lot of money. It’s not just your trend is going to be lower; their day one costs are lower.
What happens if an employee quits their job half-way through the plan year, for example?
Once they've made this transition, we are the broker for each employee. The plan that they have purchased with money that they contributed from their payroll, and the balance that their employer paid for, that plan belongs to them. It’s a contract between them and the insurance company they chose. So, yes, they take it with them. Their employer, as part of separation benefits, may pay for a few months of it, may pay for the rest of the year, but at some point their employer’s share drops off of it, and then they pay for it on their own at that point unless they get employed someplace else, or they decide to do something else in place, but it’s their policy.
It’s not just a health policy. It’s a whole array of what we sell in what we call bundles, which are various insurances, and there’s a credit line that gets put in place that helps them, depending on what plan structure they purchase, cover unexpected deductibles and other out-of-pocket costs. It’s a whole package that is much more fulsome than what a typical employer benefit plan would look like today.
My question with defined contribution is always are employers really going to keep up those contributions? Is that defined contribution going to keep up with inflation? Going to keep up with rising health costs?
One of the technological modules the employer activates every year is a contribution calculator. It’s one of the few things the employer will have to do year after year. They don’t get involved in the benefit structure anymore, and benefit design, or the purchase. All they do is make an open enrollment available and we do everything else.
That contribution calculation and decision-making is very important. The term, defined contribution, traditionally has meant the employer pays a fixed amount. The employee pays the balance. In our model, at one end of the spectrum is the employer pays the fixed amount and the employee pays the balance. At the other end of the spectrum, is a fixed amount for the employee and the employer pays the balance. Then in the middle, is a percentage sharing. The employer might say, “I paid 80% of costs last year when this was group insurance. I'm going to pay 80% of whatever you choose going forward.” We can operate anywhere on that spectrum.
Who do you consider your competitors to be?
The prime competitors are the large benefits consulting firms, Aon Hewitt, Towers Watson, Mercer. These are the companies that have traditionally represented these larger employers. In the case of Towers Watson, they have their own private exchange. Our exchange model is very different for all the reasons we just discussed, but clearly they are the competitors that we see.
There’s a huge amount of competition in the small group world. Little technology companies, and HR outsourcing companies that have popped up over the last year, all have great technology for helping employees or other consumers get to health plans. We don't view them as real competitors, but we find that their presence on the market has really elevated the investment in helping employees be better consumers.
I don't think anybody, including the architects of the Affordable Care Act, believe that group insurance as we know it today will exist 10 years from now. The dominant thinking is that everyone’s going to own their own polices. It’s just a question of how they’re going to get there. We’re just one of the very early movers right now to make that happen.
