In the past 24 months I have sat on dozens of insurance panels and ultimately the question that arises at these events is: Do you think private exchanges are here to stay?
There are many people in the industry who are downplaying the role of private exchanges, calling the concept a fad, or just a souped-up version of a cafeteria plan from 20 years ago, or a supercharged benefit administrative system. And, while I respect their opinion, I find it to be a very naïve view of the future.
Lets start with a definition of a private exchange: A consumer driven, defined contribution marketplace solution supported by sophisticated technology, consumer decision support tools and an integrated call center. While granted that in 2014 private exchanges are still in their infancy stage, I feel that market conditions around health care and the ability to control costs for an employer have set the stage. And based on my experience at MarshBerry, and interviews with employers and employee benefit consultants, I believe that private exchanges will gain significant market share of 30% or greater over the next three to five years.
If I am close to my estimate of market share, I believe it is then important that employee benefit consultants consider developing a private exchange strategy to be in place by the end of 2014. An employee benefit firm study performed by MarshBerry in late 2013 found that 72% of those firms surveyed indicated that they were developing a private exchange strategy for their clients and prospects.
Furthermore, a 2013 survey performed by Array Health indicated that 70% of employers expect to move to a defined contribution model within five years. For those firms that choose not to develop a private exchange solution, then I believe your toolbox will have a significant void when competing against your peers and ultimately begin to lead you down the path to irrelevance as an adviser. Irrelevance defined by the inability to compete effectively and differentiate yourself from your competition.
Lieblein is an EBA advisory board member and executive vice president at MarshBerry. Reach him at Rob.Lieblein@MarshBerry.com.
Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Company, Inc. 4420 Sherwin Road, Willoughby, Ohio 44094. (440) 354-3230. Except where otherwise indicated, the information provided is based on matters as they exist as of the date of preparation. Past performance is not necessarily indicative of future results. MarshBerry Capital, Inc. does not provide tax or legal advice and these professionals should be consulted separately.
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