Private exchanges are preconfigured online marketplaces that allow employees to shop for healthcare and other benefits. They are quickly gaining ground as an outsourcing opportunity for employers in the administration of traditional health and welfare benefit programs in tandem with a new dimension—outsourcing employee services related to healthcare. A recent Deloitte Consulting LLP survey revealed that 8 out of 10 employers surveyed will consider evaluating private exchanges over the next three years.
While today’s private exchange models appeal to some employers, many more organizations are waiting to assess the experience of other employers before adopting an exchange strategy. These organizations want to:
- See evidence of sustained healthcare cost management
- Know how private exchange services will integrate with—or replace—current structures
- Get a sense of how employees will respond to an exchange transition
- Understand how employer risk—liability, performance, perception, etc.—will be managed
Enabling greater adoption will require private exchange solutions to continue to define their services and target populations. Success will depend on how well exchanges perform along three key dimensions.
1. Services for Choosing and Using Benefits
Employees choose benefits during an annual enrollment period, a process that happens prior to the beginning of a new plan year and typically over a 2-3 week period. Today, the focus of most private exchanges is helping employees during this shopping and selection period. By providing a choice of carriers and plans along with assessment tools and services, they assist employees in selecting the plans that best fit their needs.
Once enrollment is concluded, most ongoing employee interactions with respect to using benefits are handled by the insurance carrier and not the exchange. However, rather than halting interaction, there is an opportunity for exchanges to make ongoing employee engagement easier. They could provide information, tools and services to help employees manage carrier interactions, without taking over the role of the insurance carrier.
For example, flu shots are often part of the annual preventive care available to employees, but not all employees get them. Why? Perhaps they don’t know where to go, are too busy, don’t realize they are free or don’t believe in them. Whatever the reasons, what if private exchanges—working with health plans—provided information, tools and a customized list of places to get a flu shot—and even offered to make an appointment for the employee? It’s about combining encouragement, education and convenience customized to an employee’s situation.
Said differently, private exchanges can help employees understand and manage ongoing carrier interactions 52 weeks a year instead of just the 2-3 weeks during open enrollment, perhaps providing “concierge” services to employees for their ongoing carrier interactions. Employers and health plans want employees to engage in healthy behaviors—and private exchanges can help facilitate the engagement.
2. Trusted Advisor Relationships
Employers want to ensure that employees value healthcare benefits as part of their total compensation package, and many support an “employer of choice” attraction and retention talent strategy. They want to engage their employees, encourage the use of wellness and disease management programs, control costs and improve the overall health of their workforce. At the same time, employers might be uneasy about employees feeling abandoned if their benefits are transitioned to a private exchange.
Employees in general are aware of the need for healthy behaviors and want to be savvy consumers of healthcare and other benefits. They are interested in useful information and resources, but in many cases are resistant to employer presence in health management or employer-incented behavior change. Many employees prefer managing health-related issues on their own and interacting with resources they trust.
Can private exchanges address employer uneasiness and employee preferences by adopting a new paradigm—a goal of establishing a trusted advisor relationship with employees?
Consider the case of an employee looking to have an elective surgery—say a knee replacement—that could be scheduled in the future. The employee would typically ask her doctor to suggest a surgery center. She might ask her health plan if the facility is in network and what the cost will be. What if she could turn to her private exchange? Working with the health plan, the exchange could coordinate information such as quality data on the facility, a listing of various cost components including pre- and post-operative care along with cost ranges. Imagine getting cost and quality information on the surgery center, surgeon, anesthesia, physical and occupational therapy, home care, etc., all in one place before the surgery for both the doctor suggested facility and other alternatives? Despite efforts around quality and price transparency, the average employee does not have the tools (or the expertise to operate such tools) to navigate these emotional, clinical situations—this is an opportunity for a trusted advisor.
Gaining trust will require a private exchange to demonstrate that the focus is on employee health and well-being, not on financial savings for the employer or the health plan. The exchange will need to separate its services from current employer services, and determine how they could be delivered to today’s social-media active and non-active employee segments. And most importantly, the exchange will need to determine how these services will integrate with the services provided by carriers and providers.
3. Full Suite of Outsourced Benefits Services
In providing employee benefits, employers are required to select carriers and plans; determine appropriate contributions; manage ongoing administration, compliance and communications; and control current and future costs through multiple engagement programs. It’s a complex business.
Private exchanges offer employers the opportunity to outsource many of these benefits-related administrative functions. However, there are significant differences among today’s private exchanges with respect to the services they offer and, if provided, how well these services are delivered.
While all private exchanges offer a choice of plans and/or carriers and decision-support tools for employees, they vary on their approach to delivering end-to-end benefits outsourcing solutions. These variations manifest themselves in both availability and the level of integration to existing employer services.
As part of a move to private exchanges, employers need to determine what services they want the private exchange to provide—benefits provisioning, administration, compliance, wellness, cost management, etc. With this in mind, private exchanges might create modular approaches that allow employers to pick and choose the services they want to retain versus those they want to outsource. For example, the ability of private exchanges to provide Affordable Care Act (ACA)-related compliance services may be as important to some employers as the ability to provide a choice of plans and carriers.
From outsourcing of administration functions to the outsourcing of employee services, the role private exchanges can play for employers is significant.
Changing the Adoption Trajectory
Imagine if private exchanges could create a trusted relationship with employees. Would employees react positively to the shopping experience? Would employees value the advisory services? Would greater engagement help control costs? Would employers enlist private exchanges to a greater degree if they could replace more of their current structure?
If answered in the affirmative, the adoption trajectory of private exchanges by employers would likely see a radical change. However, until that happens, the outsourcing of services to private exchanges will continue to move at a more gradual pace.
About the Authors
Sanjiv is a seasoned healthcare and benefits practitioner with deep experience in private exchanges, outsourcing, and consumer health.
In addition to his consulting work with employers, health plans and benefits administration companies, he has had operating roles at several private exchanges, benefits administrators and consumer health companies.
His work has focused on current and future models of private exchanges and employee health engagement. He is part of Deloitte’s leadership group on private exchanges and transformational healthcare strategic initiatives.
Grant has extensive experience in developing communication strategies for organizations implementing benefit program changes, including transitions to private exchanges.
He has served as the communications and change project lead for complex program implementations at clients in a variety of industries, not-for-profits and the federal government.
He has written a number of white papers in the healthcare benefits space and is a member of Deloitte’s private exchange leadership team.
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