Do you have—or are you considering—a private health care exchange strategy?

A thorough strategy should consider populations and HR service delivery implications

Posted by Jill Korsh, and Frank Giordano on January 14, 2016.

Many organizations are considering or have adopted a private insurance exchange (PIX) strategy. According to a 2015 Deloitte Center for Health Solutions survey, employers that have adopted private insurance exchanges (online marketplaces where participants can select health insurance) are positive about their choice. The majority of these adopters believe it simplifies their role, makes it easier to offer a defined contribution approach, and improves access to broader physician/hospital networks.

About a third of respondents (30 percent) who haven’t adopted a private exchange say they are interested in moving to one, with the majority of this group (62 percent) anticipating a move within one to two years. If your organization is among those contemplating the adoption of a private exchange strategy—or if you have one already and are looking to expand it—a thoughtful, holistic approach that considers the many implications and complexities will go a long way toward achieving positive outcomes for you and your participants.

Important considerations: populations, exchange models, and service delivery implications

In addition to common considerations such as cost, benefit plan choice, and compliance, a holistic approach to a private exchange strategy should address the interplay among populations, exchange models, and HR and benefits service delivery.

  • Populations: Your private exchange strategy should identify your various population segments and how your approach to healthcare benefits may differ for each, based on the segment’s needs and requirements. For example, your population segments may include current benefit-eligible full- and part-time employees (and perhaps various subsets, such as union and non-union), Medicare-eligible retirees (maybe grandfathered and non-grandfathered), pre-Medicare-eligible retirees, and ineligible or coverage continuation (COBRA) participants. For each population, the healthcare strategy, and type of private exchange model, may be different.
  • Exchange models: Each of the three main types of private health care exchange models—Medicare Exchanges, Individual Coverage Private Exchanges, and Group Coverage Private Exchanges—comes with a different set of target populations, services, roles, and responsibilities. Some exchange providers offer multiple models, while others choose to focus on (or have more experience with) a specific solution. Adding to the challenge are the varying levels of maturity. Some exchange models are newer in their evolution than others, particularly those involving the public exchanges established under the Affordable Care Act (ACA). Each private exchange model has implications for HR and benefits service delivery.

Private Insurance Exchange Models and Populations

Source: Deloitte Consulting LLP

  • HR and benefits service delivery: Your private exchange strategy affects how you deliver HR and benefits programs and interact with participants. Call centers, online information and enrollment systems, and data management/IT systems—whether administered in-house or outsourced–must be integrated with the exchange. If multiple exchange providers are used, they may need to interact with one another as well. In the case of a Group Coverage Private Exchange, the exchange provider can actually become the outsourced administrator for all health and welfare benefits. Alignment between your exchange strategy and your HR and benefits service delivery strategy is essential.

Two key choices: best-of-breed vs. single provider

An often overlooked consideration is whether to contract with a single exchange provider for all populations or opt for “best-of-breed” exchange providers for specific population segments. Either choice comes with implications for the participant experience and service delivery.

Choosing a single exchange provider with capabilities across all populations and models can streamline service delivery in terms of communication and limiting handoffs between parties during transitions due to status changes or milestones (e.g., retirement, Medicare eligibility, part-time to full-time, etc.). However, a single provider’s exchange solutions may not be an ideal fit for all of your populations. For example, a single provider may have a strong Active Employee/Group Coverage Private Exchange but less experience with its Retiree/Medicare Exchange.

A best-of-breed approach may better serve each unique population’s needs, capitalize on exchange provider strengths, and provide for a positive participant experience. However, it does bring some challenges—most notably, a complicated benefits service delivery model. Having multiple providers involved in aspects of service to each population requires careful service delivery integration, communication, and coordination. To avoid unforeseen service delivery challenges, a best-of-breed strategy should be pursued by choice, through a well-planned population and private health care exchange strategy, not by chance as you migrate populations to exchanges over time.

Think it through

Surveyed employers believe that private exchanges provide value along several key dimensions: they are a vehicle to help improve employee satisfaction; they help employers comply with ACA requirements, and they simplify the employer’s role in benefit administration. We believe that realizing these and other potential benefits of private exchanges depends on careful consideration of several factors and, most importantly, how those factors interrelate.

Consider questions like these:

  • Who are your populations and their health care benefit needs?
  • What’s the business case for adopting a private health care exchange strategy? What are your overarching goals?
  • What makes sense for your needs—a single exchange provider or a best-of-breed strategy?
  • Along with those involved in setting health care strategy, who else should be involved in the decision process? A lack of holistic thinking can lead to a host of miscommunications and challenges down the road that could have been avoided with up-front input from relevant parties.
  • What’s your go-forward plan? When will you reevaluate?

While exchange providers often come to the table with value propositions and business cases for their particular offerings, they aren’t necessarily equipped to help you take an independent and holistic view of your needs. A private health care exchange strategy should include broad analysis of the potential costs, benefits, and impacts—including your populations and implications on near- and long-term HR and benefits service delivery—in order to make informed decisions based on the needs of your organization and the populations you serve. Careful planning and a holistic approach can help avoid potential pitfalls and equip your organization to better meet employer and participant needs.

Jill Korsh is a director in Deloitte Consulting LLP’s Human Capital HR Transformation practice with more than 20 years of health and welfare employee benefits and human resources consulting experience. She is focusing on working with clients to execute employee benefit plan delivery strategies related to evolving marketplace exchange solutions.
Frank Giordano is a manager in Deloitte Consulting LLP’s Human Capital HR Transformation practice with more than 13 years of health and welfare employee benefits and human resources consulting experience.

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