“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.



Public Exchanges, Private Exchanges – Friends? Enemies? Frenemies?

The growth of both public exchanges and private exchanges in the past few years has been quite remarkable.  For the sake of definitions, public exchanges include federal and state based exchanges established by the Affordable Care Act. Private exchanges, in this blog post, will be used to cover large, benefit consulting exchanges that serve the enterprise employer space (think 5000 employees and above).

While working at a state-based exchange, I recall attending an information session held by a large consultant private exchange organization.  The folks from the consulting firm seemed surprised by my attendance and asked why a fella from a public exchange was there.

Considering the fact that these public exchanges serve very large employers while public exchanges serve individuals and small businesses (currently defined as 50 Full Time Equivalents -FTEs- or less), I didn’t quite see why my attendance was being called into question. Can’t a health care geek get his geek on by attending an evening session to learn about private exchanges?

[The answer is yes, but you have to read to the bottom to find out why…]

Of course, that was more than a few years ago.  The landscape has changed. The view of both private and public exchanges has changed.  Private exchanges continue to grow leaps and bounds.  Public exchanges seem to be getting their legs under them after struggling mightily for a few years.  And you know what else has changed?  The ability for public and private partnerships to demonstrate that they can work.

Consider this – any benefits broker or consultant worth their salt knows that solutions for active, full time employees is good for their employer clients. But what about other employees like pre-65 retirees and part-time employees?  Hint: solutions that provide services for those “other” employees are ALSO good for employers.

It just so happens that private exchanges can fill a gap here.  Forward thinking folks identified this gap and have pursued collaboration and cooperation with both the federal public exchange and a number of state-based public exchanges. In fact, when I was working for a state-based exchange, I set up a collaboration with two of the large private exchanges that involved warm-transfers from their exchange to the state exchange to facilitate enrollment.

What does this mean?  For an employer with full time, part time, and pre-65 retirees, it means a one-stop shop for them.  These employers use the private exchange as a solution for all of their populations. Since the private exchange has a partnership – typically through a vendor partner – with the public exchange – voila.  One-stop shop.

Oh, and that private exchange story I shared above – the one that questioned my attendance because I was working for a public exchange?  I now work for them.

Private Exchanges are Booming…Now What?

Employers are selecting private exchanges. Defined contribution achieved. Employees are signing up – and buying down. Savings all around. Private exchanges = success.


Well, let’s not celebrate just yet…

If the move to private exchanges is simply a cost shifting play where employers set contribution levels and employees select lower cost, higher deductible plans, then I suppose you can break out the party hats, confetti, and horns.  We’re well on our way.

But if the move to private exchanges is more about better outcomes, health improvement, better decision making, higher quality providers, patient engagement, wellness, and well-being – then we’ve got some work to do.

More to come soon…

Ask Not What An Insurance Exchange Is…

…rather ask what an insurance exchange could be.

By now, you may have read about the incredible growth in insurance exchanges, both in the public sector as well as the private sector. Some exchanges serve large, enterprise-sized businesses. Others serve mid market employers. Some offer slick user interface and choice. Others are still getting the UI/UX down. And others are public (government) exchanges focused on individuals and small businesses.

On a basic level, an insurance exchange allows more choice for employees while allowing an employer to budget costs via defined contribution. Exchanges can also be a new distribution channel for health insurance companies and other insurance lines.

That’s today…but what about tomorrow?

Choice and budget will only take an employer so far before the employee begins taking on more of the cost of insurance in future years.

Therefore, what an exchange could be is what should be driving the innovation and strategy for the future of insurance exchanges.

So let’s ask some questions to help frame how exchanges can and will evolve:

How can an exchange drive employee engagement?  How can an exchange help provide transparency to its members and help members make better, more informed decisions regarding their health?  How can an exchange use technology to simplify some of the complexities that exist in healthcare? How can an exchange help impact health decisions and health outcomes? How can an exchange be leveraged to change the way the healthcare delivery system operates today?

More to come on this soon…for now, I’ll simply leave you with the above questions.