For employers contemplating moving their group health benefits to a private health insurance exchange, determining the appropriate exchange model requires a careful examination of their overall benefits strategy and objectives.
The majority of private health insurance exchanges are being marketed to employers as a means to transition their active group benefits to a defined contribution arrangement in which employees are presented a range of health and voluntary insurance plans and given a fixed amount to apply to the cost of their coverage.
The marketplace for private insurance exchanges is generally divided into two segments: single-insurer exchanges and multi-insurer exchanges.
Multi-insurer exchanges provide employees with access to coverage plans underwritten by multiple national and/or regional insurers, and are operated by benefits brokers, consultants and other third-party service providers.
Single-insurer exchanges provide plans offered through just one insurer and can be operated by a third-party intermediary or, in some cases, by the insurer itself.
From an employer's perspective, both models are underpinned by the prospect of achieving greater predictability and control over their group benefit costs, as well as giving employees a broader selection of plans more tailored to their individual needs.
However, not all exchange models are available to certain groups of employers (see related story). To the extent that an employer's choice of exchange models is not demographically limited, experts say there are a variety of advantages and disadvantages to each type of exchange that must be weighed against the company's strategic priorities.
“The most important thing for employers to think about is what they're trying to accomplish with regard to their employee health benefits,” said Jake Biscoglio, vice president of Hartford, Conn.-based Cigna Corp.'s private exchange business. In addition to participating in several third-party multi-insurer exchanges, Cigna launched its own proprietary exchange earlier this year.
“There are a lot of different reasons that an employer would look to an exchange for their benefits delivery,” Mr. Biscoglio said. “It's important for the employer to understand where the value is coming from, and to make sure that their benefits goals and objectives can be met through the particular type of exchange that they're looking at.”
Experts say employers looking to maintain a direct relationship with their health insurers, as well as some input regarding specific coverage options and provider networks offered to their employees, are more likely to gravitate toward a single-insurer exchange platform.
“The level of input that the employer has in designing the specific benefit plans offered to their employees is generally greater in single-insurer exchange models, at least under the current market conditions,” said Nancy Scola Lombaer, a partner at Chicago-based benefits consulting firm Laurus Strategies. “Even those insurers operating their own proprietary exchanges are going to have a set of recommended standard plans for the employers to offer their workforce, but certainly larger employers are going to have more flexibility to tweak those plans than their smaller counterparts.”
Additionally, experts said single-insurer exchanges often are more conducive to cohesive, enterprisewide workplace wellness and chronic disease management programs.
In a multi-insurer exchange, “you may be in a situation where your employees' access to those kinds of programs varies depending on which insurer they select from your marketplace,” said Larry Boress, president and CEO of the Chicago-based Midwest Business Group on Health. “That would make it very difficult for an employer to put together a consistent strategy.”
Conversely, employers seeking to provide their employees with the broadest possible selection of health and voluntary benefit options are likely to find more value in a multi-insurer exchange environment, experts say.
“The multi-insurer model allows the employer to set up and provide a deeper, richer marketplace for their employees,” said Ashish Kaura, a Chicago-based partner at Strategy&, the consultancy firm formerly known as Booz & Co. “The idea is that employees can select benefits that are more tailored to their specific needs, and employers can reduce their overall health care costs as a result of employees buying down their benefits and selecting leaner options.”
Mr. Kaura said the multi-insurer exchange model also would likely attract employers looking to realize additional cost savings by outsourcing some or all benefits administration responsibilities to their exchange provider.