My name is Courtney and I am a Project Coordinator on Lockton’s HR Technology and Outsourcing Practice. I joined the team fresh out of college, with little experience or knowledge of the world of HR Technology. So, as you can understand, I was completely overwhelmed! There is so much to know about HR tech and I had no idea what the heck single sign-on or manager self-service even meant! I have learned so much over the past year, and I wanted to share my take on some HR Technology topics in case, like me, you are unfamiliar or new to HR Technology. So now I’ll take a stab at explaining private exchanges, because after all, they are everywhere right now thanks to the Affordable Care Act.

So, what exactly is a private exchange?

“An Exchange is a marketplace whereby multiple buyers are connected to multiple sellers for a given service or product.”

Basically, a private exchange is a marketplace where employees can go, and based on certain eligibility criteria and characteristics, can select from different health insurance plans available to them through their employer. (Kind of like a virtual mall for your benefits!) Instead of offering employees preselected health insurance plans such as an HMO, PPO, etc. you can offer multiple insurance plan options through an exchange. A private exchange can look very similar to the public, state-based exchanges or they can be considerably more complex with non-medical products like vision, life and/or pet insurance. But there won’t be any government subsidies on a private exchange!

What are the different kinds of exchanges?

Private exchanges can be broken into 3 main types:

Group Private Exchanges

• Employer sponsored plan (employer = seller who determines the products offered)
• Employees = buyers who make their purchasing decisions based on their individual needs
• No subsidy
• Pricing is employer-specific (employer determines the prices charged to employees)
• An online technology platform supports the exchange (in place of a Benefits Administration system) and offers decision support tools and online enrollment
• They can be either  Multi-Carrier or Single-Carrier

Individual Non-Medicare Exchanges

• Available to individuals and pre-65 retirees
• Subsidy available if web based entity
• Regulated plan designs (State/Federal)
• Ex: Healthcare.gov

Individual Medicare Exchanges

• Available to Medicare eligible individuals and post-65 retirees
• No subsidy
• No underwriting
• Regulated plan designs (Federal)

Why would you want a private exchange?

Private exchanges allow employees more choices and the option for them to choose their own benefits versus having one plan or a small set of plans offered by the employer. This extra freedom for employees can help drive higher satisfaction with their benefits. Why? Because people can buy-up or buy-down in coverage to find a better match for their health and financial needs. A lot of people believe that exchanges will save employers money, but that isn’t necessarily the case. (A topic which will be addressed in another post, as it deserves its own!) Another reason that an employer would want a private exchange is that due to the Affordable Care Act, full-time employees have to be offered qualified medical care and an exchange is a way to do so, since it can be limited to only those plans that meet or beat the standard.

Why would you not want a private exchange?

Contrary to popular belief, private exchanges are not actually cheaper, especially if an employer was already invested in a Benefits Administration system or was outsourcing. Another reason that Private Exchanges might not be the best fit for your organization is if you are only offering one option for healthcare, like we do here at Lockton, you wouldn’t need an exchange to offer multiple plans.

Who are some of the players in private exchanges?

Some of the vendors playing in the group Exchanges are Liazon, AON Hewitt, bswift, Benefitfocus, Buck Consultants, Bloom Health, Mercer, Aetna, Towers Watson, Willis, United Healthcare, Optum and multiple other Benefits Administration vendors.

Some of the vendors in the Pre-65 Individual Exchanges include: Individual Health Quotes, eHealth, Health Markets, GetInsured, GoHealth, FindHealthOptions.com and Healthcare.gov.  For the Medicare Individual Exchanges you have Extend Health, Select Quote, Medicare.gov and FondHealthOptions.com.

What is Lockton doing with private exchanges?

Lockton is serving as an advisor for clients who are considering going the private exchange route, meaning that Lockton is independent from the exchange owners. Lockton isn’t providing an exchange platform, but rather helping employers to select the platform that would best fit for them or determine if an exchange is even the right fit.  Lockton is developing multiple exchange options and partners, compared to a single solution like some of the other brokers. Lockton has developed an Exchange Workgroup to organize and simplify the exchanges marketplace and has named an Exchange Director, Mike Smith, who will work with the Lockton Account teams on exchange development and implementation. We’re helping him build a marketplace analysis tool to help employers evaluate all exchange options that would match their needs.

I hope you’ve enjoyed reviewing what I’ve learned or are learning along with me for those of you who might be new to this HR Technology world too! Look out for a post later this week from another HR Tech rookie as he goes through the process of enrolling at Healthcare.gov and shares his experience.