It's debatable if the fiduciary standard is 'higher' than suitability. But the better question might be, who's holding the bar?
By Cyril Tuohy
All of a sudden, the benefits world is changing at breakneck speed.
The days of two or three traditional health plans -- along with insurance products such as life, long- and short-term disability and supplemental insurance from one or two carriers -- are rapidly ceding to a benefits mall where employees have choices among five or six plans offering health and insurance benefits catering to individual coverage.
The plethora of choices come courtesy of private health care exchanges, which are popping up around the country.
Even with advanced algorithms helping employees choose what coverage is right for them, advisors may want to ask their clients what they are shopping for, particularly as the marketplace hasn’t developed a “gold standard” for what a private exchange should look like.
Not all exchanges are created equal. Some exchanges are highly consultative and ask employees many questions about their personal situation before recommending an insurance product. Others are more cursory, said Ashok Subramanian, CEO of Liazon Corporation, a widely used health insurance exchange platform.
Still others were born out of human resources and payroll administration companies that have “bolted on” an exchange platform. In all, about six or seven exchange platforms have a legitimate claim as an exchange platform, said Ashok Subramanian, chief executive officer of Liazon Corp., one of the most widely used health exchanges nationwide with 2,400 companies.
“As organizations determine which exchange is a good fit for them, a gold standard will emerge as the best exchange, who offers the best service, the best customer support, the best analytics, the best range of products,” he said.
That standard hasn’t yet emerged as private exchanges, moved along by the Affordable Care Act, adjust to their new identities as benefits malls linking dozens of insurers and hundreds of thousands of workers at dozens of companies.
Major employers like Sears, Darden Restaurants and Walgreens have signed on with AonHewitt Corporate Health Exchange. The 18 companies on the AonHewitt exchange brought roughly 330,000 employees. That number nearly doubles when dependents are included, the company said.
Petco, Kinder Morgan, DineEquity, Addison Group, Sanborn Map Co., Surgical Specialties Corp. and Vistronix have joined Mercer Marketplace, the exchange sponsored by the global benefits consultant Mercer.
The 52 companies on the Mercer exchange represent more than 200,000 employees and their dependents the company said.
Arby’s, Bob Evans Farms, Church & Dwight, Ovation Brands, Domino’s Pizza and Xerox are on RightOpt, the exchange run by Buck Consultants. More than 400,000 participants are covered through that exchange, Buck Consultants said.
Laurel Pickering, president and chief executive officer of the Northeast Business Group on Health, a 190-member business coalition, groups the exchanges into four categories: benefits consultants and brokers, health insurance plans, technology-driven intermediaries with heavy analytics and simple “pure-play” benefits models.
It’s up to employers and their human resources departments to decide which exchange will serve their employees best.
About 170 million Americans are insured through employer-sponsored health care, and a recent survey by AonHewitt found that the majority of employers will remain in the employer-sponsored health care game for the next three to five years.
The coverage is likely to be offered through a private health care exchange as employers look to the exchanges to assume the burdens of health benefits administration and deliver a robust set of analytics to advise employees. The analytics are similar to retirement algorithms that help guide workers in their 401(k) investment choices.
Of the 170 million Americans covered by employer-sponsored health care, an estimated 40 million will buy benefits through a private exchange by 2018, according to projections by the global consulting firm Accenture.
Subramanian said exchanges have experienced a “buydown” effect, which is when employees tend to buy less insurance than they would otherwise get in a traditional employer-sponsored plan with fewer options.
Many traditional plans overinsured employees for the premium they were paying, and were fairly rigid in terms of options.
The exchanges offer a lot more options. Coupled with advanced analytics, employees are more likely to find coverage levels better suited to their needs. Exchanges have found that employees are willing to take a bit more risk at much lower premiums, Subramanian said.
That’s where advisors who intend to keep an eye on their clients’ choices may want to double check to make sure their clients are covering the basic minimum.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at email@example.com.
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