the session, “Dissecting Private Healthcare Exchanges” at the 2014 NMHC OpTech,
panelist Mike Smith, director of exchange solutions at Lockton Companies,
focused on the future of healthcare exchanges. Smith described the meaning,
various types, and goals of private healthcare exchanges and their effects on
the healthcare market.
So what is a healthcare exchange? Smith described it as “a marketplace where buyers and sellers come together in an online environment to conduct commerce.” Key components often include:
- A marketplace-shopping experience for the consumer;
- An online technology platform that could be integrated with, or be a potential replacement for, a benefits administration system;
- Employer-sponsored programs that create a marketplace with multiple choices, such as platinum, bronze and gold level healthcare options with some offering up to 20 different choices;
- Employer-funded defined contribution, which could include payroll deductions and what percentage the employee will contribute; and
- Access to related resources.
He noted that the private healthcare exchanges are taking three approaches: Multicarrier, single-carrier and client-centric. They can benefit employers in numerous ways by providing:
- Predictable long-term costs for the employer
- Defined contribution vs. defined benefit
- Higher satisfaction by providing employee choice
- Integrated benefit offerings across all employees
- Ability to “get out of” the benefits process
- Cost reduction through:
- Buy downs by employees. That is, when employees have a choice and they are buying with their own money, they tend to purchase less expensive options.
- Free benefits administration. Employers usually get free benefits education when they become part of a private healthcare insurance exchange.
Smith also provided a snapshot of the type of companies that would most benefit from private healthcare exchanges, including:
- Employers with impacted populations (e.g., part-time, seasonal, retirees, etc.)
- Companies that acquire and divest firms (Through private healthcare exchanges, these companies can provide a lot of choice, but then they also don’t have to grandfather in plans.)
- Employers that really want to provide an expanded choice
And finally, he emphasized that there are numerous reasons why people will continue to enroll in private healthcare insurance exchanges. However, like with any large-scale company decision, employers must “sit down with their broker and think carefully about the financial and administrative pros and cons of moving to an exchange,” said Smith.