Brokers historically play a significant role in deciding on and helping employers determine what benefits are right for their employees. So when private health care exchanges most of them featuring decision-support tools built within them started to rise in popularity, many brokers feared they would not be needed anymore.
On the contrary, amidst private exchanges rapid growth more than one-in-four employers are considering moving to a private exchange in the next three to five years, according to PricewaterhouseCoopers it is becoming ever clearer brokers are needed more than ever.
Brokers will continue to play a significant role in private exchanges, as they have in traditional benefits consulting, says Don Garlitz, executive director of exchange solutions at Chicago-based private-exchange operator bswift, which was acquired by Aetna in November 2014. Garlitz explains the brokers main role is in the distribution or bringing the solution to their clients.
Try to envision a world that did not involve brokers, he says. Employers would have to connect to exchange solutions and that would be difficult. Employers dont want to be responsible to go out and search those marketplaces themselves without help.
While there is talk that exchanges are a catalyst for disintermediation of the broker, they are in fact leading to exactly the opposite, adds Alan Cohen, chief strategy officer and co-founder of private exchange operator Liazon, which was acquired by Towers Watson in November 2013.
Private exchanges make the brokers role much more critical in many areas, he says. [Private exchanges] really are going to do a great job of differentiating between brokers who know what they are doing and do a good job and ones that [dont].
Looking back over the previous five to 10 years, there has been very little innovation in health insurance and premiums have continued to rise 5-15% a year, Cohen says. Brokers made more and more money doing the same thing running a spreadsheet and seeing who has the cheapest (rates), he adds. Exchanges entirely change the game in numerous ways.
Brokers role
Historically, brokers played the role of keeping an eye on the market and bringing the best solution to their clients. But with private exchanges, a brokers role starts from the beginning, as it is much more complicated than picking the cheapest plan, Cohen says. First, brokers must help a client determine if a private exchange is right for them. After that decision there are many steps, including determining which benefits offered, if there will be a defined contribution setup, which exchange to use, and more. There are a number of different exchange providers and they are all so different, Cohen says. The differences are way more complicated than United and Aetna [spreadsheets].
The days of pure sell are now numbered to say the least, says Shan Fowler, director of marketplaces at Charleston, S.C.-based Benefitfocus, which provides the technology behind the private exchange offerings of players like Aetna and Mercer. What [private exchanges] provide is a great opportunity for brokers to get closer to their customers, because there are many complexities that have been introduced into the benefits landscape thanks to health care reform, but also thanks to market changes.
Once an exchange provider is determined, a broker needs to work with their client to determine what should be on the exchange shelves, including providers and types of products. Cohen says at Liazon there are clients who offer 20 types of benefits to employees, while others offer 10. This is a multidimensional analysis, he explains. Should you be offering a single-carrier exchange with Humana from Liazon or dual-carrier with Aetna-UnitedHealthcare and seven plans? Its different for different customers. That is really complicated.
After that, another decision must be made which revolves around how much money to allocate to benefits and what happens with money that is not spent.
All of these steps are a lot harder than which co-pay is lower, who has the best drug plan, Cohen says. And unlike a traditional benefits plan that often changes little year-over-year, private exchanges do have a lot of change and require an annual determination of is this right provider, the right store, the right financial decision.
Every year that is a significant level of deep complicated high-end benefit consulting, Cohen says, and we found the most successful brokers are starting to realize that their client is no longer just the person in human resources, their client is all the people who bought the insurance.
Many brokers as a result have set up their own call centers so employees with questions do not contact the carrier, as they historically would have, but instead go to a brokers call center. This approach creates benefits for the broker. Once your clients are all those employees, as long as you serve them well, you keep that client for life, Cohen says. Its no longer a situation where a new CEO wants their golfing buddy to be their broker.
Getting going
Brian Murphy, partner at Buffalo, N.Y.-based Lawley Benefits Group, offers the Lawley Marketplace private exchange to his clients. The exchange model really fit well with many of the firms smaller group clients, he recalls.
Starting a private exchange was in part a defensive play, but also a way to meet the needs of mid-market clients, says Ken Olson, president of Chicago-based Horton Benefit Solutions, who offers a private-labeled exchange through national broker organization Assurex Global.
[We] felt a responsibility and understanding that health care reform was about affordability and access, but also innovation, he says. This was a time of justifying and validating brokers to understand and lead the market instead of waiting for a carrier to develop something or a new technology startup to come in and say, You need technology.
To find a vendor to build that exchange involved a committee of Assurex companies to determine which consultant to use. This space of technology was not a natural one for us, there were benefit administration vendors, payroll companies many people in the technology space, Olson says. But we spent more time to pick the right consultant to vet out these vendors. During the process, there were new technology vendors contacting them every week offering private exchange technology.
Among those venders was an onslaught of startups. That was very scary, as we risk our reputation and our clients program to a vendor we have little history with, he explains.
Private exchanges are bringing to the forefront the needs that clients have around technology and the need for brokers to understand it and help their client properly use technology, adds Rhonda Marcucci, consultant with Gruppo Marcucci in Chicago.
The challenge that Olson experienced is one Marcucci knows all too well with her clients. While employers are relying on brokers and consultants to help them with technology, the broker/consultant has been reluctant to go there, since they think of themselves as a trusted adviser for insurance products, not technology. Those two things have come together in a major way, especially in the private exchange market, Marcucci says.
For Olson and Assurex, after hiring a consultant, they went crazy with a request for proposals and narrowed a list down to five from 50. They then had three for face-to-face conversations, eventually choosing Businessolver.
By building the private exchange through the Assurex consortium it brought volume to the table and also helped bring clout to the exchange when contacting carriers.
Since launching the exchange in January 2014, Horton has added in the area of 7,000 employees lives in to its private exchange over 2014. We are pleased with that number, Olson says, as it includes many smaller groups.
Murphy, of Lawley Benefits Group, also says his firm has seen significant new business through their private exchange, which uses Liazon technology. Further, many existing clients have expressed interest in moving to the exchange. We thought it was a strategy that our employers will embrace, he says.
Looking at the significant upfront cost, Murphy explains that his company prides itself on innovation and investing in things that benefit customers. It was a cost of doing business, he says. We really thought it put us head and shoulders above our competitors.
It was an investment, but you have to constantly reinvest in your business, he adds.
In the end, brokers need up their game and private exchanges are a way to do so. Brokers we work with are really happy because they struggled in the past to differentiate themselves, Liazons Cohen says. Products, carriers were the same and every damn spreadsheet looked the same.
Now [they] have an opportunity to demonstrate how much better it can be, he adds. Its a tremendous opportunity for the best brokers.
