Exchanges have been successful for retiree coverage. But, will they work for core coverage? Based on my market results, employers like the concept: Give employees a defined contribution plan with from five to nine medical choices and the annual open enrollment message sounds more positive.
However, the strategy breaks down when the employers defined contribution isnt enough to buy acceptable benefits. It also doesnt work well for employers that have already steered employees to high-deductible, less-rich plans. But it is an intriguing answer for many employers.
Conveying reality
What do employers think when they hear, exchange? Many seem to believe it will involve a similar multi-carrier selection option. But the reality for middle-market employers is that a single carrier with multiple plan options will be the only option. Carriers are not willing to take the chance of selection with smaller employee groups. Employers would be unwilling to pay selection loads if the carriers did agree to participate. A single risk pool ensures that a homogenous risk pool is available that can be underwritten for pricing. It also allows both the employer and insurance carrier to manage the risk, with plans designed in view of the employers benefit delivery philosophy and budgetary considerations. Tools like wellness and disease management can be customized to the group because, in the long view, costs have to be contained.
Advising clients
Your clients are about to get inundated with private exchange options. Every one of them will purport to have market-leading advantages. The national consulting firms are introducing their proprietary platforms. Carriers are introducing their own solutions. Payroll vendors have bundled enrollment modules. And, regional firms are partnering with enrollment vendors to provide flexible solutions to meet the unique needs of the middle-market client.
Some key questions we suggest our clients consider:
1. Have you evaluated the quality of the decision support provided?
2. How flexible is the platform? Are you committed to the consultants platform products or can you elect to use custom-designed programs?
3. Is there cost transparency? These platforms are not free to access. Is there full disclosure of costs for setup and ongoing maintenance?
4. What are add-on costs for communications and enrollment support?
5. Exactly who is providing customer-level support and how customizable is this support? Will the support be integrated for technology issues and traditional product eligibility and claim support?
6. What size clients are typically enrolled on the platform? Have you asked for customer satisfaction survey results?
An enrollment platform, whether or not in conjunction with a private exchange, makes sense. A lot of friction will be taken out of the system, and there will be no going back.
Health care delivery is undergoing a seismic shift. And unless and until costs get in control, change will continue. Flexibility will be the key. Responding to financial, technological and regulatory change will be the biggest human capital challenge facing many employers. Annual knee-jerk adjustments simply will not be sustainable. Employers will need long-term strategies, and private exchanges may be a part of that plan.
Hasday is chief operating officer of Frenkel Benefits, LLC, one of the largest privately held independent employee benefits brokers in the United States. Reach him at
