Still in their infancy, the intention of private benefit exchanges may evolve as a measure to further control healthcare costs or provide options for smaller clients, who no longer provide coverage, according to James Harmon, president of Cleveland-based Dawson Consulting Group. In a Q&A with EBA, Dawson discusses AssuredOptions, the private exchange of AssuredPartners, the 13th largest independent insurance brokerage firm in the nation with offices in 27 states. Dawson is a part of AsusredOptions.
EBA: What is the structure of your exchange? What makes it different?
Harmon: We at AssuredPartners are committed to the defined contribution model. We believe that as the workforce changes — as well as our clients — they are looking for this type of structure, which offers more choice to both employer and employee. Second, a private benefit exchange has the ability to help employees with the selection of what the appropriate level of benefit is for that individual. And third, it can offer tools to help an employee understand the true value of the benefits they are receiving. Most people underestimate the value by 40% to 60%. We feel the defined contribution model helps educate the employees as to the dollar amount that is being spent for them on this benefit and helps them use that dollar in the best possible way.
What we feel really sets us apart is that we have made the commitment to hire a dedicated exchange manager who works with our clients, our prospects, as well as our sales and account managers to help in the onboarding and selection of the products for the private exchange.
EBA: How do you recruit clients?
Harmon: First is through our current clients who are using carriers already on the exchange. We want our clients to be aware of the exchange technology and to be able to provide them with cutting-edge solutions to help them retain and attract employees. As a consultant, we feel that we need to make them aware of this option and help them in the selection process.
Quote"As we have become more refined in our understanding of who uses this technology, we have identified certain key constituencies who embrace it."
As we have become more refined in our understanding of who uses this technology, we have identified certain key constituencies who embrace it. For example, technology firms are really excited about having private exchanges and being able to provide it to their employees. We have targeted those types of clients, to be able to say to them, ‘Hey guys, here’s something that your industry embraces, it is really cutting edge and your employees will really embrace this because this is what they deal with every day.’ For example, a couple new accounts we wrote for Jan. 1 were technology firms who said, ‘This is exactly what we want; this is exactly the technology we are looking for.’
EBA: What is your relationship with brokers?
Harmon: We are a broker/consultant. They are our competitors. We have 600 licensed producers and then even more account managers as well.
EBA: How does 2016 open enrollment compare to 2015?
Harmon: We saw more than 10 times the client enrollment year-over-year. We started our exchange in 2014, so 2015 was our first full year of operations. In 2015, we did not hit our expectations because we were late to the dance. By the time we got up and got everyone trained, we had missed the crucial Jan. 1, 2015 open enrollment period. In employee benefits, depending on the size of your group, that period accounts for anywhere from 50% to 60% of your open enrollment.
For us, 2015 was below our expectations. 2016 we are back on track of where we think we will be. Private exchanges are not going to be the only arrow that everybody uses. It will be one of the arrows that is going to be available to clients and has to be looked at for the right client set and the strategy for that client.
EBA: Where do you see private HIX’s fitting in the healthcare game moving forward?
Harmon: Going forward for us, they are going to a part of our strategy for our clients. Something we always discuss with them, talking about how a defined contribution plan can help a client achieve their objectives for providing good benefits to help attract and retain employees.
Quote"As the world changes, how we use an exchange is going to change as well."
As the world changes, how we use an exchange is going to change as well. If the Cadillac tax gets pushed back even further, for example, we have had a lot of conversations with our bigger clients about how to use a private exchange from a strategic point of view to help control or mitigate the Cadillac tax. Second is if we look at how an exchange works, does that translate into looking at an individual exchange for smaller clients who don’t want to offer health insurance. That could be something down the road that may be a substrategy or subsection of how an exchange works. The other issue is how you can help control your costs using an exchange. That is still unclear because we don’t have enough empirical data to see does this control health care cost like everybody thought it would or is it just a tool to help people in the selection process.
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