Three myths about private exchanges in the post-ACA era

Joe Donlan, president, ConnectedHealthFor health plans and employers, hearing the words “PRIVATE EXCHANGE” might cause two reactions: interest or fear. But there’s no need to worry if you fall into the latter category.

Given the constant barrage of news and social media about healthcare prices rising (and falling and rising again), and the fact that many companies are still trying to find their footing among health reform laws, it’s no wonder some businesses are hesitant to dive into the world of private exchanges – or, “benefits marketplaces” as they are also known.

But before you get weighed down by rumors and speculation, let me address three myths I often hear when I’m talking with insurance carriers and employers.

Myth #1: “Public exchanges will be the only option in the future.”

We certainly expect the public exchanges to have a much smoother and successful open enrollment season this November and beyond. They’ve had time to regroup, work out the glitches and prepare with lessons learned from last year.

But we also anticipate the private sector will continue to flourish, too. After all, many private exchanges have been doing this for years, even before the Affordable Care Act (ACA) was officially law.

In other words, they’ve got some serious know-how under their belts.

So, after you read through the latest study on why employers may be hesitant to make the shift to a private marketplace (which seem to come out weekly these days!), stop and consider these numbers:

• An estimated 3 million people have received coverage through a private exchange, according to a recent study from Accenture (2014), and 40 million are expected in 2018.

• The revenue forecasts are impressive, too. According to OLIVER WYMAN (2013), private exchanges could represent a $5 billion business by 2015 and close to $12 billion by 2020.

Although it’s early to forecast with one set of data, given the excitement we have seen as well as our own experience last year, we would support these significant growth estimates.

Myth #2: “Employees will have a difficult time enrolling in coverage through an exchange.”

The way people receive healthcare is changing – dramatically. New mobile technologies and “smart” wearables encourage people to become engaged healthcare consumers and monitor their health – when and wherever they want. This is consumerism at its best, and it’s exactly where our industry SHOULD BE heading.

Healthcare consumerism has to be factored into your enrollment experience if you want happy customers. In other words, if you make the process personalized and more like an online retail experience, consumers will be able to enroll in their selected coverage options through an exchange with confidence because it’s something they understand.

Yes, healthcare is different and more complicated than selling shoes. And you need to provide the resources (recommendations, call center support, communication materials, etc.) that will help guide people through their decision-making process. But the overall online experience and transaction process can approach what the retail world continues to master.

Keep in mind, though, that enrollment is only one key to this puzzle when it comes to successful engagement. You have to help your employer clients think beyond enrollment and how to engage consumers throughout their entire customer lifecycle.

Myth #3: “Defined contribution is just a fad.”

If you’re old enough to remember when the 401k first came onto the scene in the 1980s, then you probably remember that it took a while for that concept to build momentum – years , in fact. Case in point: In 1984, there were 7.5 million active participants. Today?  There are over 51 million. (source: EMPLOYEE BENEFIT RESEARCH INSTITUTE).

Defined contribution as a mechanism to provide an employee a set of benefits is following suit. Why? Because the truth is that implementing a private exchange with a defined contribution can be an effective way for companies to control benefit spending while providing employees with personalized and high quality coverage options. It’s a win-win. But again, it’s all about creating that familiar online retail experience with coverage options that have been curated for employees.

Private exchanges may be relatively new in the healthcare world – and, as a result, more susceptible to industry speculation – but in a short amount of time, they’ve emerged as a powerful expression of healthcare consumerism. This is not just a trend, but a full blown movement. And carriers have a unique opportunity right now to take full advantage.

Donlan is president of CONNECTEDHEALTH, an online insurance portal.