Brokers Seen As Key To Helping Employers Sift Through Private Exchange Models

By Cyril Tuohy

InsuranceNewsNet

Health benefit brokers have their job cut out for them as they help employers navigate through a myriad of private health exchanges popping up around the country, according to experts in the area of health care distribution.

Employers are dumping the stale, outdated coverage model embodied by the so-called “cafeteria” health plans in favor of greater choice offered by the exchanges, rapidly filling the new needs of the benefits marketplace, and that’s where brokers step in.

“They are still a trusted advisor to clients and clients are looking to them to say, ‘I like this choice, I love this defined contribution plan, but help me decide among eight medical plans, and among these ancillary plans,’ ” said Michael Karp, chief revenue officer for Liazon Corp., in an interview with InsuranceNewsNet.

No one knows exactly how many private exchanges there are in the U.S., but many big employers have said they will continue to offer health benefits as a way to attract and retain talent. Group coverage will therefore continue, at least in the short term.

Big benefit brokers like Aon Hewitt and Mercer, as well as smaller brokerages, have launched exchanges on their own.

Alan Cohen, co-founder of Liazon, and Christopher E. Condeluci, an attorney with Venable LLP, point to the emergence of three private exchange models from which employers are likely to choose coverage for their employees.

One model consists of group market private exchanges. They are aimed at fully-insured group health plans to employers with between two and 3,500 employees, and also serve self-insured employers. This model represents a big departure from the way many employers typically offer health care coverage consisting of a choice among two or three plans.

The second model, dubbed the “individual in group clothing” private exchange, enables employees to buy plans in the individual market through an employer-funded health reimbursement account. Such plans would be available only in some states due to regulatory restrictions.

The third and simplest exchange models offer a variety of health plans underwritten by multiple carriers.

Helping companies decide which plans work best for their employees is where the brokers will continue to have a role as insurance carriers decide on which exchanges they would prefer offering their coverage, Karp said. “At the end of day, carriers will make decision as to that exchanges they will play with and support,” he said.

Some carriers will prefer to create their own exchanges. Other employers will prefer to use an exchange hosted by an outside vendor like Liazon, yet brand the private label exchange with the name of the employer.

Liazon operates the Bright Choices Exchange. In February, Liazon agreed to provide an exchange for group clients of Conner Strong & Buckelew, an insurance, risk management and employee benefits brokerage and consulting firm based in Philadelphia and Marlton, N.J.

And last month, Edgewood Partners Insurance Center of San Mateo, Calif., announced that its employee benefits practice would offer clients a new way to manage benefit program costs through Bright Choices Exchange.

“The Affordable Care Act presents employers with the opportunity to take a fresh look at the role health benefits play in attracting and retaining top talent," said Anna Pavlenko Willson, principal and senior consultant in EPIC's benefits practice, in a statement.

Brokers working on behalf of employers, are going to find themselves picking through health insurance “stores” – coverage permutations offered by Aetna, UnitedHealth or Blue Cross Blue Shield, for example – instead of picking from individual plans from each carrier, Karp said.

Then, brokers along with their clients are going to have to figure out how much money the company should be giving every individual employee to spend in the exchange to purchase coverage.

But private exchanges may yield their greatest value in the area of supplemental coverage as the algorithms recommend to employees how best to fill insurance coverage gaps.

The exchange may recommend a low-cost plan, for example, but supplement the plan with ancillary coverage for catastrophic health events only. Ancillary choices would also range from long and short-term disability, to long-term care, to dental coverage and even pet insurance.

Cyril Tuohy is a writer living in Pennsylvania. He has covered the financial services industry for more than 15 years. He has also written about food, restaurants and travel. He can be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].