Private Exchange Market
A Report from the Front Lines
MAHP Summer Conference 2014
Denise Christy
Private Exchanges : The Ultimate CDHP
Private Exchanges PHIX
Private versus Public Exchange
Private Exchange
Public Exchange
Organizer
Employer
Federal Government
Target Population
Employees with group
heath coverage
Individuals uninsured or
with private insurance
Plan Design
Employer/Carrier
State or Fed requirements
Plan Selection
Individual employee
Individual
Scope of Benefits
Essential health benefits
Essential health benefits
Subsidy
Employer usually 50% of
single
Federal subsidy with
income below 400% FPL
Mandate
Employer
Individual
Premium Tax treatment
Pre- Tax dollars –section
125
Post Tax- itemized above
7.5% of income
Technology
Decision support
No Decision Support
Ancillary offerings
Full scope of financial
protection
Medical only
Private Exchange Goals
Create a competitive market in health care benefits at a
retail/consumer level
Facilitate the movement to a defined contribution model for
those employers who are aligned with this philosophy
Expand choice, allowing consumer selections (e.g., networks,
premiums, deductibles) that could not be driven
unilaterally at the employer level.
Source: Aon Hewitt.
If you’ve seen one Private Exchange …
you’ve seen one
Mercer
Towers
Watson
GlidePath
Local and
National Options
Aon Hewitt
iSelect
Custom
Benefit Store
Gallagher
Willis
Brown /Brown
Different Models of Exchanges
Competition growing daily: positive for
the market
Single Carrier Exchange: Multi Carrier Exchange:
• GlidePath, Aetna, Cigna,
Humana
• Sold through licensed agents
• Sole product offering is that
of the carriers
• Will compete on multiple
platforms ( multi-carrier and
Partner exchanges)
• Offered through national
consulting houses (Mercer,
Buck, Aon, Towers
• Offer to retirees and actives
• Back end risk adjustment
tools for carrier adverse
selection
• Walgreens, Home Depot,
Sears
Multi Carrier Agent
Partner Exchange
• iSelect
• Contracts with multiple
carrier partners to create
store with multiple brands
• Employer chooses one brand
for each benefit offering
• Marketed exclusively
through agents
Defined Contribution: From Parenting to
Partnering
Defined Benefits to Defined Contribution
Game Changer
Shifting from DB to DC
Employee
Decision/Managed
Employer
Decision/Managed
• Preserving the group
benefits offerings and
all the tax benefits
• Driving a more
educated and engaged
worker- values the cost
of care
• Offering choice and
financial protection for
all levels of talent/roles
Budget the Spend-Transfer the Power
Employer Decides
Lump or Tiered
Classes of Workers
Split or Total
HSA allocation
Unused Dollars
Waiver Credit
Part Time
Drivers to Defined Contribution
Hard Drivers
1. IRS Notice 2013-54 /DOL 2013-03- HRA usage
2. 2018 “Cadillac Tax” 10,200/ 27,500
3. 9.5% Contribution maximum
4. De-Risking the Balance Sheet ( Walgreens)
Employer Adoption of Private Exchanges
Unless
you’re
the Lead
Dog…..
Employer Market Options in a Post
Reform Marketplace
Least Change
2015---------------------------2018
Most Change
Keep what they
have
Continue
coverage/
adjust
offering
45-50%
Offer
through a
private
exchange
35-45%
Hybrid
offering
3-5%
Opt
out
4-9%
Survey Results
• Private Exchange Strategy for a Post Reform Market
• MACPA Conference, April 29 2014
• Denise Christy
3 million Enrolled though the Public
Companies
Three Reasons for Employers to
Choose a Private Exchange
1. Costs – Employers seeking cost reductions
and predictability in their costs.
2. Enhance Employee Satisfaction- Employees
have a say in choosing their plans.
3. Relieve administrative headaches and the
compliance burden.
Reason #1 Costs
• Higher uptake of CDHP plans on Exchange
• Predictability of costs from a budget
management point of view
• Impact of new product offerings to enable
employee purchasing lower cost options
(narrow networks)
• Higher consumerism levels to bend trend on
utilization
Average per employee contribution is
$337.16 per month
Educat
NonPft
Finance Health
Service
Manfac Retail
Service
Tech
Total
Gross
Spend
13,310
12985
12926
12040
11316
13460
11958
12542
Net
Spend
9521
8302
9258
8121
7502
9224
8374
8496
Employ 3789
ee
Share
28%
4683
3668
3919
3814
4236
3584
4046
36%
28%
32%
34%
31%
30%
32%
Source: PWC 2014 employer survey
Choosing the HDHP options
Walgreens Perspective De-Risking
Self funding – Walgreens
held all the risk.
1. Disease Management not working
due to lack of integration
2. Wellness/ no medical premium ROI
Employer
Employee
Carrier and Provider
Private exchange- Each
stakeholder plays their
part
•
Carriers take on the risk and the
disease management where it
belongs.
• Employers contribute at a pace
in keeping with market variation
and talent retention
• Employees choosing and using
care and coverage greater insight
to the cost.
Reason #2 Employee Satisfaction
Liazon Employee Survey July 2013
This is what employee Engagement
Looks like!!
Liazon, 2013
Reason #3 Administrative Burden and
Compliance
• PPACA requires employers to now track the
following:
–
–
–
–
–
–
–
–
–
–
–
flex spending account annual limit
Detailed Dependent information
Employee acknowledgement of SBC’s
Employee acknowlegement on Notice of Exchange
Form w-2 Reporting
PCORI Fees
Waiting period limited to 90 days
Wellness Incentives
Full-time/Part time status and hours worked (stability and lookback periods)
6055 and 6056 Reporting ( 2015 extension)
Auto Enrollment Rule (guidance pending )
HRIS and Enrollment Platforms
Integrate
In the next year most companies will be engaged
in evaluating their HR automation process.
CedarCrestone HR Systems Survey
Private Exchange Technology will automate the
enrollment experience, through consumer centric
decision support.
Most PHIX technology solutions will have full
integration capability with payroll and SAS HR vendors
to support compliance reporting .
What do we expect this year?
Small Groups 2014-2015
DB or DC?
Level Fund or FI
Hold or Move?
Shop the renewal
or hold the plan.
(HAP and PH not
forcing a roll to
ACA plan)
Evaluate the best
option from a
funding approach.
All carriers offering
this option
Determine if a
Private
Exchange/Defined
Contribution is
the best Solution
60% of Carriers Small Group
block are renewing December
2014
Large Group Strategies
2015 Mandate kicks in..
• Employers who have not covered previously
are now seeking coverage.. Carriers may apply
participation penalty surcharge, but must
issue coverage
• Agents are now introducing DC as viable
strategy
• Most Self Funded employers will stay the
course, moving to mostly CDHP plans with
HSA’s
Wellness Integration: Re-thinking the ROI
• Employers shifting focus
from medical cost reduction
to employee engagement
and productivity
• Incentive based programs
on activity completion and
in compliance with ACA
• Works well with defined
contribution approach
attaching rewards to their
spending account.
Private Exchange: New Bases to Cover
for Sustainability
Thank You