In the past year, private benefit exchanges continued to see higher interest as compared with previous years, thousands of new lives have been added and we’ve seen multiple changes in the products on exchange stores shelves.
For plan year 2015, enrollment in private health care exchanges doubled from the previous year to hit 6 million, according to Accenture. Most of the growth was in the mid-market segment.
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That growth was driven by employers focusing on long-term benefit strategy and not one-year solutions, says Sharon Cunninghus, leader of Mercer’s private exchange, the Mercer Marketplace. With upward cost pressure year-after-year, many employers have run out of traditional options for cutting costs through benefit offerings, she says.
Exchange growth is expected to carry forward into 2016. Employee Benefit Adviser’s Private Benefit Exchange Index increased for the sixth straight month in December.
Since the index was launched, the eight operators participating in the PBE Index’s data collection effort report that more than 1,385 employers have moved workers to their exchanges. This, in turn, has led to an increase of 160,122 employees and 341,095 lives now being covered by benefit plans sold through the sites.
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“The industry is waiting for the Fortune 500, Fortune 10 companies to jump on,” says Alan Cohen, co-founder and chief strategy officer at exchange technology provider Liazon. “We shouldn’t hold our breath.”
“Exchanges can deliver substantial real benefits to mid-size and small companies,” Cohen adds. “They are the real vanguards of change and the vanguards of adoption.”
Still, some large employers did make a shift to a private exchange in 2015, including Starwood Hotels & Resorts Worldwide,
Products and Costs
This year also brought change to product offerings on private exchanges, as well. “We’re moving away from just enrollment and plan selection to more plan use, ongoing use,” says Barbara Gniewek, principal at PricewaterHouseCoopers and a member of the Private Exchange Evaluation Collaborative. “It is no longer just technology. It shouldn’t be tech-enabled plan choice. It really is how to use plan benefits.”
However, Gniewek says the pace is not as fast as she would like, but “the products are getting better, which I love.”
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“The tools that are on the platform are better and trying to get engagement on how not to just pick a plan but how to use the plan on ongoing basis,” she explains. “Working on education and making people more engaged, empowered and accountable
Not only has the change been on the member side, but also the supply side in 2015. “We’ve focused on demand and [are] starting to really see improvements … through multiple networks and high performing networks,” Gniewek says. “Where it is moving, too, is taking a nice direction.”
That is what needed to happen, she adds. “First we get people in. Then we start to look at the care and see if we can control cost that way,” she says.
Brokers
For brokers, the business benefits of an exchange became more obvious this year, as well. More than half (52%) of insurers and brokers responding to an Array Health survey saw a reduction in administrative costs while 48% increased their market share if they offered a single-carrier private exchange. Of those that plan to offer an exchange, more than half (55%) expect a reduction in administrative costs will be among the benefits, followed by increased revenue (45%), and increased market share (43%), the survey found.
An early 2015 PwC survey found that more than one-in-four employers are considering moving to a private exchange in the next three to five years, raising concern for brokers they wouldn’t be needed as the exchanges have built-in consumer-decision tools. But in 2015, the opposite played out — brokers were needed more than ever.
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“Try to envision a world that did not involve brokers,” says Don Garlitz, executive director of exchange solutions at Chicago-based private-exchange operator bswift. “Employers would have to connect to exchange solutions and that would be difficult. Employer’s don’t 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 Liazon’s Cohen.
“Private exchanges make the broker’s 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 [don’t].”
A coalition
In June, a group of industry players connected to private exchanges launched a coalition to serve as a forum to share ideas and best practices, and to increase awareness of private exchanges.
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The Private Exchange Coalition includes representatives from Array Health, Bloom Health, ConnectedHealth and Connecture and the organization says its goal is to “help establish private exchanges as a long-term solution for enabling consumers to easily evaluate and select employee benefits that best meet their health care, economic and lifestyle needs.”
The Private Exchange Coalition was convened by health care intelligence firm Leavitt Partners, which will advise the coalition, and selected its founding members. “Private exchanges represent a fundamental shift in insurance distribution channels that allow for consumerism to flourish and issuers and brokers to deliver increased value,” says Leavitt Partners CEO Rich McKeown.
Another private exchange coalition already exists: an employer trade group formed to solicit and provide to employers unbiased, comparative information and support on private exchange strategies and purchasing decisions. The Private Exchange Evaluation Collaborative is composed of Employers Health Coalition, Midwest Business Group on Health, Northeast Business Group on Health and Pacific Business Group on Health, in collaboration with consultancy PricewaterhouseCoopers
Mergers
In early December, Willis and Towers Watson shareholders agreed to an all-stock merger, which could not only impact their private exchanges, but also the industry’s landscape in general. At the time the deal was announced in late June, it was predicted their respective private exchanges could command the roles of best man and bridesmaid.
Combining Towers Watson’s large clients in OneExchange with Willis’ midsize clients in the Willis Advantage presents “a more formidable” presence, observes Paul Fronstin, director of the Employee Benefit Research Institute’s Health Research and Education Program, who closely follows developments in the emerging online marketplace. “They can serve clients across the spectrum and have invested quite a bit in the technology to do so.”
