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Private Exchanges and Voluntary Benefits Grow Together

Posted by Laura McMullen on Fri, May 20, 2016

Several trends and market conditions came together to make private exchanges possible. Joe Markland of HR Technology Advisors sums them up well in this piece for Employee Benefit Advisor:

  • Employers want simpler ways to offer benefits to employees, i.e. online tools vs. employee meetings.
  • Employers are looking for more and better outsource services, i.e. single signup for payroll and benefits.
  • Employers want predictable costs for benefits, i.e. defined contribution payment model.
  • Employees want more financial wellness information as they take more responsibility for their healthcare costs, i.e. investment strategies for 401(k)s and HSAs.

Another trend that has surfaced recently is the combination of private exchanges and voluntary benefits. hCentive added Assurant Employee Benefits, Chard Snyder, and Guardian, among other benefits, to its WebInsure Benefits offering. Liazon partnered with Aflac to offer critical incident, accident, and hospital indemnity. And employees are signing up: Liazon reported that “nearly half of employees buying a qualifying health plan purchased a voluntary offering during 2015 open enrollment.” About 35% of employees in Mercer’s Marketplace bought at least one voluntary benefit in 2015.

These offerings are more than the traditional dental and vision plans that have become commonplace in employee benefits. Employee Benefit News/Employee Benefit Advisor and SourceMedia Research surveyed 273 organizations representing a broad spectrum of employers. These employers expressed interest in a wide range of nonmedical benefits:


The top three benefits, wellness, retirement, and financial/retirement services, are traditionally included to some degree in large company benefit packages. Private exchanges make these capabilities more accessible to smaller companies although the survey’s authors note “relatively few (11%) of employers in the under-100-employee segment reported being ‘very interested’ in the prospect of incorporating wellness and retirement benefits into private exchanges.”

Other categories on the list such as privacy protection, legal services, and gym memberships have been included in expanded benefit offerings for some time. The strong representation in the neutral and somewhat interested levels could indicate that since these benefits are already voluntary, there’s no need to move them to an exchange. This thinking could change as exchanges become more prevalent.

Defined contribution funding for employee benefits takes the art of workplace marketing to a whole new level. Is there an opportunity for your business?

Tags: health insurance, employee benefits, Voluntary Benefits, defined benefit plan, Private Exchanges

Private Exchanges: High Interest and Slow Adoption

Posted by Laura McMullen on Fri, Apr 29, 2016

Accenture.jpgEnrollment growth in private exchanges grew 35% in the first quarter of 2016 to 8 million people, according to Accenture, or about 5% of the employer sponsored insurance market. While not the exponential growth some experts predicted, it’s enough growth to attract new entrants like Fidelity, ADP, and Zenefits to the employee benefits market. Many people are still expecting a steep growth curve as employers look for ways to reduce costs and streamline administration.

A recent survey by Employee Benefit News/Employee Benefit Advisor and SourceMedia Research found that 20% of the 273 firms surveyed were using an exchange, in the process of moving to an exchange, or considering the option. A further breakdown of these responses shows 17.2% are “considering, but not planning” to switch to a private exchange platform while the remainder are either “planning, but not implemented” or using an exchange. No employer in the survey with fewer than 100 employees has moved to an exchange yet.

What’s holding employer groups back?

The “Cadillac tax” is widely thought to be suppressing growth in private exchanges. “The Cadillac tax itself was a driver for people to drop the more expensive health plans, and therefore … it was considered to be a driver to a private exchange, but frankly, given that it's delayed now, I would say if anything the growth that you were expecting from that is not probably going to be there,” Jay Godla, Chicago-based partner with PricewaterhouseCoopers L.L.C., which doesn't operate an exchange, told Business Insurance.

Other reasons frequently cited in the EBN/EBA study for not moving to a private exchange are:

  • Private market is not mature enough (37.7%)
  • Unsure about the employee experience (28.1%)
  • Not enough information (23.1%)
  • Unsure of costs (23.1%)
    (Respondents could choose multiple answers)

But they’re still interested…

"Growth [for private exchanges in 2016] will continue to be slow. Employers seem to like the concepts that private exchanges offer — such as online enrollment, broader choice, decision support, defined contribution, voluntary integration — better than they like the private exchanges themselves, " Mike Smith, Lockton Benefit Group's director of exchange solutions, told AIS's Inside Health Insurance Exchanges.

And the big payoff will be in employee engagement. Employees who use private exchange decision support tools and have high-deductibles and other cost-sharing plan features are more engaged than those who have to accept a plan that their employer selected. Some of the exchanges sponsored by benefits consultants go one step further and offer care management options. In Employee Benefit Advisor, Barbara Gniewek, a principal in the healthcare practice of PricewaterhouseCoopers who oversees the Private Exchange Evaluation Cooperative, says “the two consultancies that offer care management overlays typically state savings of between 1.5% and 3% over carrier-only models.”

And a lot of companies are betting that the combination of lower costs, streamlined administration, and higher engagement will be worth buying by investing in platform-vendor exchanges like Liazon (purchased by Towers Watson in 2013) and bswift (purchased by Aetna in 2014), or building their own capabilities like Aon Active Health Exchange and Mercer MarketplaceSM.

When do you expect to see more employers entering the private exchange market?

Tags: ACA, healthcare exchanges, employee benefits, HIX, Private Exchanges

Private Exchanges Attract New Competitors

Posted by Laura McMullen on Fri, Apr 15, 2016

healthinsurance.jpgMany experts are talking about private benefit exchanges as the next big thing in employee benefits and new exchanges are announced regularly. In the last six months, Fidelity announced Fidelity Health Marketplace and ADP launched ADP Private Exchange while Zenefits is re-focusing its model. 

PBE Operator Report: Options Abound, a whitepaper from Employee Benefit News/Employee Benefit Advisor and SourceMedia Research, defines private exchanges as:

“A private exchange is an online platform that allows an organization’s employees to enroll in healthcare and other bene­fits. The exchange functions as a web-based marketplace, offering an online shopping experience that facilitates the enrollment process.“

In reporting the results of a survey of 36 private exchanges, the study estimates the size of the market at 100-150 private exchanges. In general, private exchanges have been active for two years or less, are operated by benefits brokers, and tailor their offerings for employer groups of a certain size in certain industries. Virtually all of the private exchanges support defined contribution and defined benefit plans.

In a 2012 whitepaper, Fueling the “consumerization” of employer-sponsored health insurance, PWC described two main types of private exchanges:

  • Single-carrier exchanges. Promoted by a single payor and designed for employers who want to retain control over the carrier and plan designs offered to their employees.
  • Multi-carrier exchanges. Promoted by brokers and benefit consultants and designed for employers who want to provide more options.

Since then, platform-vendor exchanges have entered the market. These exchanges are provided by technology companies and let employers customize plan offerings and streamline the shopping experience while retaining control over the carriers and plan designs. The technology companies are partnering with brokers and benefits consultants to enhance multi-carrier exchange offerings, for example hCentive and Fidelity in the Fidelity Health Marketplace, and being acquired by carriers to enhance their offerings, for example Aetna acquired bswift in 2014.

 In general, dental PPO networks are the same whether they are offered to traditional employer groups, on private exchanges, or on public exchanges. Medical PPO networks, however, differ significantly in the three marketplaces. Depending on your approach to each market, your recruiting needs and philosophy could vary widely.

 How do private exchanges fit into your growth strategy?

Tags: ACA, employee benefits, HIX, Private Exchanges




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