Benefits today are all about flexibility from offering employees customized choices that meet their individual needs, to the different channels through which these benefits are offered. One channel generating a lot of discussion is private exchanges. When implemented appropriately, exchanges can help employers offer more flexible benefit programs, which, in turn, offer employees the personal experience they desire.
Though its still to be seen if exchanges will drive the large amount of business originally predicted, employers are absolutely interested: Recent surveys from Aon Hewitt, PwC, Towers Watson and National Business Group on Health indicate that between 32% and 45% of employers will consider private exchanges as the vehicle to provide employee benefits before the end of the decade, and Accenture projects there will be 40 million enrollees on private exchanges by 2020.
While employer interest in exchanges is high, adoption rates have lagged behind projections for 2015. One reason behind these lagging rates may be employers lack of understanding of the options available to them. By taking time to learn about this channel, employers can better understand the advantages exchanges may provide and how to best evaluate them.
Moving to a private exchange can represent a fairly seismic shift in the benefits landscape, enabling employers to create custom employee benefit experiences within defined parameters. The foundation of high-level, set plan designs featured in many exchanges allow for both standards and choice. This is because within standard parameters, employers can offer a greater variety of benefit options creating a more personalized benefit package.
In addition, private exchanges can empower employees at enrollment with intuitive access to benefits knowledge. The best exchanges integrate robust decision support tools throughout the enrollment experience. This type of employee engagement at the time of enrollment can have a significant impact a study from private exchange vendor Liazon found that 60% of employees who enrolled through a private exchange, with shopping guides and comparison tools, are more engaged in decisions about their care. It pays to note that employees need this enhanced support: Less than half of employees strongly agree their companys benefit communications helped them understand how much they would pay for specific services, according to MetLifes 13th annual Employee Benefit Trends Study.
Employee demand for customization is high, and growing. According to the MetLife Study, nearly 40% of employees say having a wide selection of benefits would make them feel more loyal to their employer and perhaps most significantly, employees are willing to pay for these benefits, as 56% of employees say they are willing to bear the cost of their benefits in order to have a choice of benefits that meet their needs. Private exchanges let employers choose a platform that allows them to offer a variety of benefits. Combined with an easy-to-use interface, exchanges can make it simple for employees to select products that meet their individual needs.
Some employers are taking a less paternalistic role when providing benefits to employees moving away from selecting the best benefits for their employees, as well as moving away from taking on most of the cost. Employees are now bearing more of the responsibility for both choosing the benefits that are right for them and assuming more of the financial burden. Private exchanges are one channel enabling this shift.
However, even in this world of shifting responsibilities, employers are not off the hook: Communication is key to making a successful transition to this kind of model. As private exchanges provide a significantly different model of benefit selection, employees may feel like their employer is no longer taking as good care of their needs as they once had been. The right communication campaign highlights that employees can gain access to greater options and a broader range of products to choose from on an exchange. Another area to underscore in communications is that exchanges can often feature new tools to help employees from calculators that help employees understand their personal needs to in-depth educational materials. Effective and frequent communication about the potential value of new platforms, as well as tools that are now available, will help employers show their employees that this is being done for them, and not to them.
To help employers better navigate the private exchange options and experience, a good starting point is to leverage the familiar to introduce the unfamiliar: 401(k) plans. Like the evolution from pensions to 401(k) plans, exchanges represent a shift in responsibility from the employer to the employee. Framing the move to a private exchange in recognizable terms can help employees feel more comfortable and help employers explain how to maximize the options afforded by a private exchange.
When deciding whether to work with an exchange, employers should take the time to understand the differences between offering benefits through this and more traditional channels in order to determine which will best meet their and their employees needs. With a private exchange, employers and employees gain choice and flexibility and with that come responsibility. To drive success, employers should educate employees about their benefits options and provide them with the necessary knowledge in familiar terms, to enable and empower them to make the best possible benefit decisions.
Jessica Moser is vice president, channel development with MetLife.
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