“Exchange” Is Becoming A Dirty Word

Did someone just say the “E” word?

The world of insurance and employee benefits has changed immensely in the last few years.

After the passage of the Affordable Care Act, the word “exchange” was all the buzz.  To some extent, the concept of an exchange had existed for years, but the ACA brought it to the forefront of insurance and employee benefits.  “Obamacare” was being discussed and debated and each state was faced with the challenge (or opportunity – depending on how you looked at it) of establishing a state-based exchange or defaulting to a Federal model.

The public sector was not the only area seeing the emergence of the “e” word.  The private sector saw two main flavors of exchanges gain popularity – the first being large consulting house benefit exchanges and the latter being tech companies empowering small to mid-market brokerage firms as well as insurance carriers with technology designed to enable a better user experience when purchasing insurance.  This included decision support tools, cost calculators and other tools along with the employee’s choice of insurance plans.  Tech companies saw an opportunity to inject a much-needed dose of innovation (or at the very lease, 21st century technology) to a sleepy old process.

And the word “exchange” was being thrown around as much as Tom Brady throws a football in the 4th quarter of a game when the Patriots are trailing.

So here we are – 2017. What has changed?

Many federal and state exchanges saw a dip in enrollment.  [Note that some did see increases this past year]. Exchange-empowering tech companies are being bought and sold.  Both public and private exchanges aren’t seeing the types of enrollment originally predicted (though there is still time, I suppose). And saying the “E” word may get your mouth washed out with soap.

I have had conversations with executives at some of the national insurance carriers and each one is questioning the popularity of exchanges. Most are questioning their continued participation. Others are questioning if exchanges will even survive.

This shift can be attributed to low enrollment or the election of President Donald Trump and the Republicans now positioned to make good on their “repeal and replace” threat regarding the ACA.  Despite the vast differences between public and private exchanges, the ACA = exchanges and therefore the private exchanges are guilty by association.  These, in my opinion, are not a major reason for the souring of benefits consultants and HR workers to exchanges.

So what is it?

Let me back up a moment.  What, exactly, is an exchange?  Depending on who you ask, you’re likely to get multiple answers.  And rightfully so. There are a number of models out there.  I daresay that the most simplified definition is technology-enabled (or technology improved) employee benefits enrollment that often times comes with more employee selection than historically seen and – maybe – some components of employee engagement and cost savings that, arguable, are in their infancy. As a Senior Vice President of Sales at a Massachusetts health insurer recently reminded me, the move from defined benefit to defined contribution is also the staple of a private exchange.

Now we have more technology and more choices. But has it really changed anything? Are costs going down?  Is the health of an organization’s employees improving?  Or has the exchange technology, though improved, added costs without saving money?  Currently, I think we’re looking at increased cost without enough improvement. I would argue that the health insurers I’ve spoken with feel the same. Yes, many employees have bought down to high deductible health plans, but without the necessary tools to become stronger health care consumers, the impact on health status and cost is unlikely to be impacted.

With any new trend, it needs to deliver on its promises. And the promises were mixed, depending on which type of exchange you were talking to.  The initial models that were rolled out are being tweaked, improved, changed.  And though enrollment in private exchanges is not what was projected, they’re still very much alive. They’re not going anywhere.

My prediction – the models we see today will be improved.  There will be more consolidation.  The remaining dominant designs will need to move onto their next iteration. There is only so much that can be done around the “shopping experience” so the shift will be towards engagement – and rightfully so.  And with engagement will come the tools for members to become better consumers of health care. And that (hopefully) will lead to improved health and lower costs.

We may see the word “exchange” be retired or replaced by some other name, but the promise of exchanges will continue to evolve.