- Private exchanges have grown in significance as a means for payers to get their products before employers, and their growth has resulted in increasing the number of health plan options for employees and beneficiaries. Additionally, the expanded use of private exchanges has resulted in easier benefit administration, increased enrollee engagement, and greater price transparency with employees being able to customize and compare plans side by side.
A recent Willis Towers Watson report on the employer benefits marketplace satisfaction showed that private exchanges have a positive impact on company culture and employee satisfaction.
A private exchange enables employees to make a health plan benefits selection based on cost and type of health plans. Employees can easily see their employer’s contribution and apply that figure toward the products that best suits their needs.
“They have a portfolio of choices and benefits to choose from. And the exchange’s decision support technology helps them navigate through those choices to make a recommendation. You create a personalized, customized recommendation for each individual around their benefits,” Rob Harkins, Mid-Market Private Exchange Practice Leader at Willis Towers Watson, told HealthPayerIntelligence.com.
“Think of it like a shopping experience that you were given a gift card for and you have a lot of choices to choose from. In a private exchange these choices are built around a full benefit portfolio for people to choose from,” he added.
For employers, key findings in the report indicated that integrating a private exchange into their company benefits system was overwhelmingly positive. The decision to move their benefits offerings to a private exchange was viewed positively by 95 percent of employers. After migrating their offerings to the private exchange, 89 percent of employers reported a positive impact on their company culture. Furthermore, 86 percent of employers cited a company move to a private exchange as having helped them to control benefit costs.
For employees, employer private exchange adoption has led to high levels of benefit satisfaction. With only 16 percent of employees initially indicating satisfaction as a result of their employer using a private exchange, 79 percent are glad their employer made the switch. An overwhelming 95 percent of employees said they would want a future employer to have a private exchange for benefits administration.
Perhaps a reason for their popularity, employees noted that private exchanges have facilitated an increase in their health plan engagement. Eighty-three percent of employees stated the private exchanges helped them better understand their health plan coverage, and 82 percent said they are now able to make better healthcare decisions.
The private exchanges currently allow employers to offer an average of 14 different products to prospective beneficiaries. Even though more plans are available now, the use of private exchanges versus existing benefits systems led 90 percent of employers to claim the exchanges had allowed for easier and more streamlined administration.
Not only have the private exchanges have not only garnered high levels of satisfaction from employers and employee, but they also have attracted the interest of the health insurance industry more widely.
“It been attractive to insurers for three main reasons,” said Harkins. “First, they want to continue to grow their business. Secondly, especially if they’re taking the risk and it’s an insured product, their underwriting teams have learned how to accommodate the different stratification of what type of enrollment they might see within certain types of plan designs. And finally, it’s just really becoming more commonly accepted as a norm within our industry.”
Once untested, private exchanges are a proven means for health payers to get their plans before more potential beneficiaries.
“In the beginning, private exchanges were a brand-new concept for insurers, something that they were interesting in doing, but it didn’t have the penetration that it has nowadays,” Harkins explained. “Now that it’s become commonly accepted within the industry as a vehicle for offering insurance programs, we collaborate very closely with payers. We have good working relationships and build out a lot of products and services both locally, regionally and nationally with insurers to meet the needs of our employer clients.”
Depending on the size and geographic footprint of an employer, one or multiple payers will appear on a private exchange.
“We have a client that has 25,000 employees, and their choice of plan designs and carriers is quite large,” said Harkins. “Because these employees are spread out geographically around the country, they might encounter insurers which have better choices and value in certain geographic areas. With multiple insurers on an exchange, employers can take advantage of that.”
For employers that are based in one location with smaller number of employees, the need to offer multiple payers isn’t necessary. In fact, the presence of only one payer on an exchange serves to preserve the enrollment pool for the payer and minimize risk.
“You can maximize the value of a private exchange by working with one carrier,” added Hawkins. “For anything under 3,000 enrollees, most insurers are really not going to compete with each other. That’s kind of the cutoff point for an insurer to be on a private exchange.”
Beyond that figure, multiple payers come into play.
“For an enrollment pool of anything above 3,000, and those tend to be geographically distributed, that’s where you might want to consider what we call multi-carrier exchange approach,” said Harkins. “Anything below 3,000 is usually what we call a single carrier approach. And is generally considered to be the preferred vehicle in that space and size.”
For payers that have yet to fully leverage private exchanges into their employer benefit enrollment strategy, Harkins has some words of advice.
“Payers should get involved with the private exchanges, first of all, because there’s a huge migration going on from employers into this world. It really is a technology change. It’s a modernizing upgrade of benefit selection from what used to happen in the past,” he advised.
“For years most carriers have been working with the benefit administrative systems that are out there,” Hawkins continued. “This is really just a modern approach to it. In a private exchange you have more flexibility and more behind the scenes decision support, this helps an individual navigate down to the right selection process for their individual, personal needs.”
The future for private exchanges is looking bright based on recent years accelerated growth, and today they are already serving the needs of more employers and employees.
“In 2016, there was about 35 percent growth. Up to eight million people are now being covered under exchanges. We’re still waiting on the 2017 numbers in terms of what’s happening, but we expect that growth to continue,” Harkins concluded.