Exchanges – They’re Not Just For Health Insurance

The insurance exchange idea is spreading beyond the health insurance exchanges set up under the Affordable Care Act (ACA).

The exchange concept has surfaced recently for a variety of insurance and financial solutions, well beyond ACA-compliant health insurance. Some examples include:

• Retirement plans: The Washington state governor signed a law that establishes a “marketplace” (another word for exchange) for small business retirement savings plans.
• Pension buyout support: The Mercer global consulting firm recently launched the Mercer Pension Risk Exchange for pension plan sponsors that want to execute group annuity buyouts.
• Multi-featured private exchange: EPIC Insurance Brokers and Consultants debuted the EPIC Exchange Platform, a private employee benefits exchange that, among other things, provides access to several administrative capabilities plus numerous types of insurance products, not only health insurance.
• A potential long-term care (LTC) exchange: The Hamilton Project at Brookings has proposed a LTC exchange as one of several LTC reforms the researchers envision.
• Information connection exchange. IVANS, a property-casualty service, this week unveiled its online IVANS Exchange, which allows independent agencies to view and manage their carrier download connections on demand.

The exchange concept is not new. Think of stock exchanges. They are at the core of many modern marketplaces. Not long ago, there was a bitcoin exchange startup (now shuttered), for instance.

But now, various businesses are applying the exchange concept in ever-expanding ways, both online and onground, in insurance.

Most of the insurance approaches seem to follow the general structure used by the exchanges created under ACA. That is, they provide an online facility where individuals and/or businesses can search for insurance solutions offered by the providers in the private marketplace. There are many examples, but here are a few newcomers.

The Washington state exchange

The Washington state exchange was created by Senate Bill 5826, a measure signed by Gov. Jay Inslee in May with a July effective date. The measure establishes a retirement marketplace for small businesses, such as the self-employed, sole proprietors and employers with fewer than 100 employees. The purpose: to connect eligible employers with qualifying private sector plans.

Unlike most other state retirement plan laws and proposals, Washington’s plan will not be state-run. Although it operates under the state Department of Commerce, it will rely on private sector retirement products and allow for private sector financial services firms to participate. Participation is voluntary.

Of interest to annuity and insurance professionals: The law specifically states that the director “must approve a diverse array of private retirement plan options that are available to employers on a voluntary basis, including life insurance plans that are designed for retirement purposes.”

The Mercer Pension Risk Exchange

Mercer’s new pension risk exchange aims to help plan sponsors “execute group annuity buyouts in a shorter timeframe and in a more competitive pricing environment.” Key tools include capability to monitor group annuity pricing and contract terms continuously, according to the consulting firm, a unit of Marsh & McLennan Companies.

“The exchange also provides sponsors with greater exposure to a wider array of insurers that could potentially act as transactional counterparts for a buyout,” the firm said.

The service has emerged amid continued pension risk transfer (PRT) activity. In PRT transactions, a company turns over management of some or all of its pension plan to a third party, such as a group annuity company. According to Mercer, many pension plan sponsors have encountered challenges as they search for a provider, such as lack of clear information about the true cost of a buyout.

Hence, the exchange. It includes a suite of buyout advisory and execution services that can help, for instance by increasing liquidity and price transparency, Mercer said.

The EPIC Exchange Platform

Private health insurance exchanges —an alternative to public health insurance exchanges - are not new. Several have been in operation for a year or more. An April report from Accenture estimates that 6 million people enrolled in a group-type private health insurance exchange for 2015, double the number who enrolled in 2014.

The news here is that private exchanges are evolving beyond health insurance. For instance, EPIC Insurance Brokers and Consultants of San Francisco, and its Atlanta-based partner, Hodges-Mace, describe their newest offering as a “next generation private exchange.”

The EPIC Exchange Platform offers not only health insurance but also life insurance, accident insurance, critical illness and disability benefit options, and voluntary options. In addition, it integrates benefits administration and enrollment, advocacy through a licensed call center, and actuarially-based decision support tools.

Some other private exchanges are doing something similar, or planning to do so.

An LTC insurance exchange?

Some insurance professionals no doubt will wonder why anyone would propose an exchange for LTC insurance, given that standalone coverage is not a big seller.

The first thing to know is that this exchange is not fait accompli. It is a proposal from Wesley Yin, an economist and professor with UCLA’s School of Luskin Public Policy. The suggestion appears in a package of reforms he released today — reforms that he says will help address the fragmented system of insurance coverage for LTSS, or “long-term services and supports” (which includes LTC insurance).

Among other things, the reform package calls for creation of a voluntary LTC Advantage program. This would enable people to be eligible to purchase private LTC insurance for which the insurer has received a cost-sharing subsidy (in lieu of claiming future Medicaid LTSS benefits).

Here’s the exchange part: Consumers would log on to an online exchange, enter personal information and then view estimated premiums. The final premium and coverage would be set only after completion of the formal application process, Yin said.

Accelerators

In its April report on private health insurance exchanges, Accenture listed a number of “accelerators” that it believes will help spur further adoption of such facilities. These include increased administrative requirements, an employer mandate requiring employers to revisit their benefits strategies, the Cadillac tax and more.

One more accelerator might be added to the list. That is the exchange fever that appears to be heating up the general insurance environment, especially for online business connections.

InsuranceNewsNet Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at [email protected].

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Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected].