January 7, 2014
The State of the Nation’s Private Employer Exchanges: Crazy!
If you’ve seen one private exchange—you’ve seen exactly one private exchange. Exchanges are all different, from their front-end requirements to their back-end requirements.
I’m not talking Patsy Cline’s “Crazy” or even Gnarls Barkley’s “Crazy”—I’m talking Peter-Frampton-re-release-the-same-song-and-get-totally-different-results kind of crazy! In 1975, Frampton released “Show Me the Way” on his album Frampton, and no one cared. The song was re-released in 1976 on the album Frampton Comes Alive—and topped the charts in both the U.S. and U.K. In Wayne’s World, the song was described as “required listening for all suburbia.” It’s all marketing, baby!
What does this have to do with private exchanges? Most are just a re-release of technology that has been part of benefits administration enrollment for years.
The following is a short list of “new” capabilities and requirements that are typical for a private exchange:
- Defined employer contribution, instead of defined benefit.
- The ability to connect electronically to insurance carriers.
- Decision support tools, to help determine employees’ best options.
- Support for core insurance products such as medical, dental and vision.
- Support for voluntary insurance products such as life, disability and accident.
- Support for multiple insurance carriers (although some exchanges are single-carrier).
- HRA and Section 125 pre-tax support.
- Premium processing and billing support.
- Support for insurance plan comparison and other employee shopping tools.
Nearly every function defined as “new” for a private exchange is not new—these functions have been part of group benefits administration systems for over a decade. As I’ve said, the “new” private exchanges are 95% marketing hype and 5% enhanced decision support.
I have attended dozens of conference breakout sessions, read articles, talked to “private exchange” vendors and seen countless demos. The only word I can use to describe the whole group private exchange world is “crazy” — wonderful, “Show Me the Way” kind of crazy.
Given that we’ve been there and done that with the technology in the private exchanges, I can offer some informed observations about how they will play out as employees use them to select coverage under the rules established as part of Obamacare.
–It would be very difficult to move to an Expedia-type shopping model for employees’ insurance. Insurance carrier requirements for participation and underwriting through private exchanges make the disintermediation of the health insurance broker less likely than the disintermediation of the travel agent. Few exchanges are even talking about vendor participation. It takes years to develop benefits administration systems simply because of the inherent complexity of insurance. A good technologically and customer service driven health insurance adviser is worth her weight in gold, and will continue to be.
–While Health Sherpa has been described as a somewhat functional equivalent to healthcare.gov, that claim is, well, crazy. Health Sherpa—although a great idea—has no ability to process eligibility, enrollment, carrier connectivity or anything required in a true benefits enrollment or exchange platform. Health Sherpa is a clean front end for displaying plan options and rates but has no back end to support the followthrough required by the carriers or the federal or state governments.
–Recently, the president invited executives from a few of the nation’s top tech companies to the White House for a highly publicized meeting. Why? What do Yahoo and Amazon know about health insurance exchanges, enrollment, eligibility and carrier connectivity? Exactly nothing!
If the president wanted more than a photo op, why didn’t he call Rich Gallun or Don Garlitz from bSwift or ask my company, benefitsCONNECT, to join the discussion? Between us, we accurately and electronically process many millions of enrollments—completely eliminating the need for paper. Either company could have saved this country hundreds of millions of dollars and produced a public exchange for Obamacare that actually works.
There’s actually one thing that’s new about private exchanges: While benefits administrations systems have become somewhat standardized, if you’ve seen one private exchange—you’ve seen exactly one private exchange. They are all different, from their front-end requirements to their back-end requirements.
As I said, it’s a craaaazy world we live in.