The HR Technology & Outsourcing Practice has been spreading our love across the country the last few weeks via vendor and industry conferences! (Check out the Ceridian Insights and SHRM 2014 recaps if you haven’t yet.) Last week, one of my teammates, Brad, had the opportunity to attend the Private Healthcare Exchanges Conference in Chicago. Following are some of the takeaways he was able to gather regarding the Private Health Insurance Exchange ecosystem.
Early morning on November 14, 1963, the crew of a small boat sailing south of Iceland spotted dark smoke on the horizon. The captain went to investigate the smoke believing it to be a burning boat, but instead they encountered explosive eruptions producing black columns of ash hundreds of feet in the air – a volcanic eruption had begun beneath the sea.
By 11:00 AM on November 14, 1963, the eruption had reached several miles in the air. Over the next week, explosions were continuous. After just a few days, a new island formed mainly of dark volcanic rock, measuring over 1600 feet in length and 147 feet in height.
Today, Surtsey Island is roughly the size of 11 football fields (including end zones), home to ten species of plants and over 600 different insects have been found on the island. The vegetation and insects have drawn 14 different species of birds to alter their migrating patterns to land there; a group of nearly 100 seals use the island as a breeding ground every year. In short, it has developed its own ecosystem out of nothing.
Last week at the Private Healthcare Exchanges Conference in Chicago, David Smith with Leavitt Partners used this story as an analogy to the development of private exchanges; they’ve come up quick, they’re immature, they’ve developed an ‘ecosystem’ of their own and nobody knows quite what the future holds.
By my count, there were roughly 350 people in attendance: of which half were employers, a third were consultants and rest lied about themselves to maintain anonymity (actually, they were carriers and vendors). All of the sessions had some great information and a few important points stood out.
Initial results and trends:
- One consulting firm with their own private health insurance exchange estimates that by 2019 there will be more than 25 million active and retirees in private exchanges.
- 2/3 of employees at larger employers are buying the lowest priced and/or most narrow network plans. (How will this change at the second OE?)
- Employees of smaller employers (50-250 employees) buy up at the first OE.
- Some employers want multiple carriers for the illusion of a shopping experience, even though a single carrier can meet all their current and future needs.
- The reasons for moving to an exchange model are all over the board─ from culture fit, to ensuring their employees had viable and affordable options.
- A few employers indicated the decision for using a private exchange was top-down─ from a CEO with a 500 word Wall Street Journal summary or opportunistically seeking a business deal.
Technology Expectations:
An original premise of the exchange model was to exert pressure on the underlying cost of care, utilization, etc., but clearly that is not enough; there is no sustaining impact and it will be years before we can capture and validate that data. Ann Mond Johnson, Chairman of ConnectedHealth, proposes that for an exchange to be successful, the technology must incorporate a few items that have eluded us in healthcare thus far:
- Quick and convenient (Do you know about Instacart?)
- Seamless purchasing (Did you ever use Shazam to buy songs?)
- Personalization and predictive application based on historical experiences (Do you have Nest in your home yet?)
- Transparency on costs and services (Edmunds has changed the way we buy cars.)
- Choices (Anyone over the age of 30 know about Tinder?)
It has been suggested that the Private Health Insurance Exchange model brings the above pieces together. Innovations have made shopping relevant as we’re given the tools to be better shoppers, understanding the tradeoff of other ways we could spend this money. Personal data is being applied to decision support tools and many are working towards predictive modeling incorporated with wellness plans.
Recipe for success:
During the conference, I had the opportunity to visit with employers who have made the leap and what they did to incorporate the list above. The answers were not surprising:
- Start employee communication as many as 6-9 months in advance. One employer suggested as many as 18 months.
- Use all methods of communication possible: direct mail, email, and mobile. (Did you know the average person unlocks their phone 100-150 times a day?)
- Consider calling it something other than an “exchange” to avoid confusion with the public exchange and negative connotations, with best results having it match existing company branding efforts.
- A Call Center is paramount for success, and representatives must be trained on the unique characteristics of the employer’s organization.
- It is imperative to have year round service and a clearly defined health management strategy.
- There is a growing need to be creative on employer contributions to HSA, FSA, etc. (Health insurance was created to avoid financial ruin, yet today many people cannot come up with $2,000. How they could afford the deductible on a HDHP?)
- With exchanges many employers are paying more for insurance but saving on notices, subsidies etc. Ideally they will see trends decrease with better management and accountability by their employees.
- Explore all your options on plan design and funding both inside and outside an exchange model.
This list is nowhere near complete; much like Surtsey Island, what an exchange will end up looking like is much different than how it appears today. We do know that a rising tide lifts all boats and I submit the development of the new ‘ecosystem’ has sparked standard Benefits Administration Vendors to improve their technology to match that currently being developed with a Private Health Insurance Exchange offering (see Courtney’s Q3 update coming shortly). Fortunately, the client is ultimately the winner regardless of what path they choose.
Questions about Private Health Insurance Exchanges? You know the drill: leave them in the comment box below.