As employers grapple with how best to deliver health insurance to their employees, the concept of private insurance exchange or marketplace is quickly gaining traction. In a private exchange model, rather than continuing to assume the responsibility for making healthcare decisions for plan participants (or managing the risk on their behalf), an employer transfers responsibility to employees. This transfer of power enables employees to make important decisions on behalf of their families. Employers have something to gain, too: predictable healthcare costs.
But there is more involved here than simply choosing a private insurance exchange over a traditional benefits delivery model. This is not a simple switch you flip. In fact, the move to a private exchange could be difficult for employees who generally are not accustomed to making benefits plan decisions for themselves, or who balk at the potential of an increased out-of-pocket burden. It’s incumbent upon employers to guide them through the transition to help them accept the idea that having more power and choice is a good trade-off to taking on more risk. To do this, the employer must introduce a defined contribution approach to the workforce and embrace concepts like premium transparency, fixed dollar contributions and multiple plan options.
When done properly, a private exchange will help you achieve the three C’s of benefits: consumerism, compliance and cost-containment.
In short, there’s a tremendous upside toward embracing this strategy, which is a reason why most employers are investigating the option of private exchanges. For virtually every organization, it is not a matter of “if” joining a private exchange is right; it is a matter of “when.”
The key to answering “when” a private insurance exchange is right for your organization starts with understanding where you are on the course. This will help you determine what tools and resources are necessary to help get you there.
Here are three simple questions to consider:
1. How do your employees enroll in benefits today?
2. Do you have a health/wellness and cost management strategy in place?
3. How active are your employees in your current benefits decision-making process?
Depending on the answers to these questions, you may need to:
- Alter your benefits philosophy and design benefits plans and programs to help you move further down the path on the engagement spectrum.
- Design an aggressive wellness and health management strategy. While a private exchange may provide short-term cost savings, it is not a silver bullet. You must continue to drive better behaviors to control costs associated with your program over the long term.
- Execute an ongoing communication strategy that educates employees to become smarter consumers of benefits and better prepared to accept the responsibility and risks associated with making healthcare decisions.
- Implement benefits administration technology that will allow you the flexibility of managing your current program as well as a private exchange, thus affording you the flexibility of a smooth transition.
- Leverage an experienced third party, regardless of implementing a private exchange, to manage the administrative complexities and ever-changing regulatory requirements surrounding your benefits program. This is critical to eliminating costly mistakes and ensuring regulatory compliance.
Before pushing off from the starting line, consider if your organization and employees are ready for such a significant shift in benefits delivery. Keep in mind that preparation for a private exchange is a bit like running a relay. Before the starting shot is fired, everyone in your organization must fully trained to make it around the track.
Employers have an opportunity to transform the delivery, management and overall outcome of their health and welfare programs for the better. A private insurance exchange will be a critical component of your benefits program, but only after you determine your readiness and strategy before taking the first step.
Andrew Bloom is executive vice president with Corporate Synergies, a benefits plan administrator and private exchange provider.
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