Highlights from Viewpoint Q & A: The Evolution of Private Exchanges For Active Employees

April 4, 2016

Our research shows that U.S. employers are more confident than ever that they will be providing health care coverage to their employees for many years to come. That being the case, most are continually looking at new ways to manage cost and improve the value of their benefit offerings, including private exchanges.

Three senior consultants recently offered their perspectives on the evolution of private exchanges and their impact on employer-sponsored health care, based on findings from the 2015 Best Practices In Health Care Survey Report, in a recent Willis Towers Watson Viewpoint Q & A:

  • Randall K. Abbott, senior strategist for health and benefits
  • Sherri Bockhorst, managing director for group exchanges
  • Craig Jannino, senior consultant for health and benefits

The wide-ranging discussion focused on drivers of employer interest, what employees like about exchanges, and the nature of employer involvement. Participants also offered their views on risk factors in moving to a private exchange.

Here are some excerpts from the Q&A.

Drivers of interest

Many employers look at exchanges first from a cost perspective: can exchanges help them save money. But once they take a step back and look more holistically, they are intrigued by the opportunity to have more flexibility in the benefits they offer and more choice for employees.

Abbott: “Many of the employers we work with see an exchange as an opportunity to design programs that are more responsive to the Gen Y population — the millennials in the workforce today — as well as the even more tech-fluent Gen Z coming behind them.”

Jannino: “[Employers] are interested in leveraging the technology, the innovation and the choice available within the private exchange to enhance their ability to attract and retain the newer generations of employees.”

Bockhorst: “An exchange allows the employer a much more streamlined path to achieving the company’s specific benefit goals through a single source. It relieves the Benefits team of the burden of managing the RFP [request for proposal] carrier search every three years, doing their best to choose the right national carrier for their employees regardless of an employee’s health status and location….

What employees like best

OneExchange satisfaction surveys show that the number one reason employees give for liking an exchange is choice. But sometimes employers worry that too much choice can be overwhelming.

Jannino: “[Many employers] wonder whether employees will be able to make the right decision for themselves based on all of the new options that suddenly become available to them when they join an exchange. What we find is the private exchange technology makes the employee experience of choice so much easier than a self-managed plan, it’s not a problem. The tools enhance employees’ understanding of their benefits and their ability to select the benefit package that makes the most sense for them.”

Bockhorst: “What’s great is that we’ve evolved our exchange to allow choice for both the employer and the employee. We have the responsibility for creating the warehouse of available carriers and plan designs, then the employer chooses from that warehouse what they want to offer to their employees. Then, their employees get to shop from those choices, using the technology and call-center support provided by the exchange. The degree of choice for both the employer and the employee is really popular.

Employer involvement

In the early days of private exchanges, many employers thought they would lead to a reduction in the HR staff. In fact, that has rarely turned out to be the case.

“As with any major benefit strategy or administration change, HR needs to do significant implementation work, especially in the first year of the move to the exchange. For one thing, HR usually acts as the liaison with other employer functions, for example, IT and finance, that are also critical to successful implementation.”

Abbott: “… our experience has been that employers continue to be very much vested in their overall program management. They have an active interest in participating in that process. They of course remain the plan sponsor, the plan administrator and risk fiduciary for legal purposes, and still have accountability for any requirements under the ACA. So the employer role is as vital as ever — maybe even more so — to the success of the overall process with the active exchange team complementing HR and providing even more support and resources to enable more effective program delivery.

Bockhorst: “…after a company moves to an exchange, we have seen [HR] roles become more strategic in nature.”

Risk factors

Moving to a private exchange must align with organization’s business goals and benefits strategies. Beyond that determination, implementing an exchange is no more or less risky than any other benefits decision.

Abbott: “I see no more risk in the private exchange model when it is properly structured and properly vetted than in continuing a self-managed program. The greatest risk is not dealing with the issue at all. In judging risk, employers need to make a conscious evaluation of their current state, consider the private exchange premise and determine yes or no, it does or doesn’t make sense, and — if there are certain circumstances under which the employer would move forward with a private exchange in the future — identify what are those criteria and when will they know that they are triggered.”

Bockhorst: In fact, an exchange will oftentimes be a much less risky path to deliver benefits than self-managed, in the sense that the exchange is investing tremendous resources in technology, call centers, communication, vendor contracting, network strategy, data warehousing and integration. The employer gets to take advantage of all of that intellectual capital when they are ready at no additional fee — it’s just part of what the exchange delivers.”

To read the complete Viewpoint Q&A, click here.

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