How to evaluate a private health insurance exchange
Plans must reconsider the benefit delivery models that employers could leverage in this post-reform world.
Variations in the exchange models make it difficult for health plans to clearly evaluate which, if any, private exchange could support its business strategy and membership growth goals. Key questions will help guide a health plan’s discussions with prospective private exchanges:
What’s included? With the emergence of varying models, one of the first questions you should ask is, “What’s included”? Learn more about the insurance products, funding mechanism, administration capabilities, and resources available to employees both during enrollment and throughout the year that will allow exchange members to get adequate information to be able to differentiate your health plan over others offered.
How much can you customize? Some models are simply providing the “shop and compare” platform, but the products designs on that platform are completely customizable by the carriers. Others have a fixed set of products that you are required to offer. Think through cost variances in delivering care through these different models and how it impacts your cost structure.
How sustainable is the solution? If a private exchange’s primary model for managing employer costs is defined contribution, be sure to ask questions about the out-of-pocket cost impact to the employees in year one, and in future years. If rich benefit designs are required in a defined contribution environment, what adverse selection risks will you bear? If the platform is multi-carrier, allowing for employee choice, how will you be compensated based upon the risk of the enrollment in your health plan? Think now about the potential impact to your business if you join the exchange, and then choose to drop out later if experience is not favorable.
What relationship will you maintain with your customers? With the exchange taking on the primary decision-making role on which health plans are offered in which geographies, how will you maintain a relationship with your customers? Will you still have an opportunity to showcase new innovations, solutions that drive cost efficiencies into the health delivery system or better engage members in their health? Understand your role after the exchange is deployed so that you don’t lose touch with your customers, particularly if you are concerned about the exchange’s stability.
How much exchange experience do they have? Find out why the organization chose to invest in the exchange business. Do they have the right combination of expertise in benefit design, actuarial analytics, and technology? Is this a new venture for their organization, or will the exchange be delivered on a proven, stable platform? Be confident that the level of investment and commitment to the exchange supports both a successful launch and a sustainable solution.
Given the marketplace dynamics, every health plan needs to reconsider the benefit delivery models that employers could leverage in this post-reform world. These questions will begin to clarify the differences among the various exchange models, and help you identify those which may support your business strategy.
Sherri Bockhorst, principal, Health & Productivity and leader, Health Exchange Solutions, Buck Consultants.