Has the private exchange market stalled — or is it just getting started?
Media hype made us think it would happen overnight. But while private benefits exchanges still haven’t gone mainstream, there has been a tremendous explosion in the adoption of automated enrollment systems. Just notice how many clients now have some type of benefits administration platform in place today.
When it comes to private exchanges, employers across the nation are just getting their feet wet; it’s a big step to go from paper to electronic enrollment. What is liable to happen is that as businesses see their needs grow, they will demand more out of the technology. Here are some of the features and components they may find themselves adding:
Multi-plan selection: Whether it be 12 different medical plans, 4 different dental plans and a menu of voluntary products such as home, auto and ID theft insurance—the ability to provide employees with real choices for how to allocate their benefit dollars is the raison d'être for a private exchange.
- Flexible funding capabilities: Sure, defined contribution has been around for a while…but exchanges allow employers to get crafty and use the technology to set guiderails for employees. Depending on the desired outcome, different strategies can be utilized to influence the selection process. Three examples:
- Contributions by tier: With this approach, employees receive contributions based on their coverage tier—as opposed to their age, gender or use of tobacco—and must allocate those funds toward their medical plan first. Any leftover funds may be used on other plans, although the employer may choose to earmark funds for specific plans. If the designated plans are not chosen, the money is returned to the employer.
- Contributions by age: Employees receive contributions to their medical plans based on their age and may use any leftover funds on other plans. Once again, the employer may choose to earmark funds for specific plans, with the money reverting to the employer, if those plans are not chosen.
- Lump sum contributions: Employees receive a set amount of funds to use on any offered benefits that they choose. Any unspent monies remain with the employer
- Decision support tools: Also known as recommendation technology, these are more than simply embedded YouTube or Vimeo links. They are interactive support tools that drive outcomes and educate the consumer.
"Advisers can help their clients push the envelope, but to do this they really need to know what technology is out there and how one system differs from another."
There are many other possibilities, such as incentive-based wellness programs, ACA compliance tools, employee self-service features, activity tracking and reporting capabilities. The real point is that exchange technology will continue to evolve and the features and functions that are available today are just the beginning.
Advisers can help their clients push the envelope, but to do this they really need to know what technology is out there and how one system differs from another. If you find yourself saying “they all look the same,” you are looking at the sheet metal and haven’t gotten under the hood. The next time you’re kicking an exchange’s tires, try asking the vendor some of these questions:
- How flexible is the technology?
- Can you stock the shelves with any product you choose or are you limited to certain carriers?
- How do the carriers connect to the exchange?
- Is enrollment fully automated or is part of the process still manual?
- What types of defined contribution scenarios can be programmed into the system?
- Will it support surcharges for things like tobacco use or spousal coverage?
- What type of decision support does the system provide? Are these tools restricted to multiple-choice questions or do certain responses elicit different actions?
- Does the platform support wellness programs and can you use credits as incentives for certain activities?
The answers will make it clear that not all private exchanges are created equal. And in terms of employer adoption, we are just witnessing the tip of the iceberg.