Private Exchanges - Creating New Opportunities for Consultants - Part 2 of 2

This is the second installment in a two-part series on the emergence of private exchanges in the benefits marketplace.  This section focuses on the opportunities for consultants in the private exchange era, particularly in the small and midsize employer market.

Delivering private exchange solutions to the small-midsize business market

Private exchanges are not just for large employers anymore.  There have been several accelerators that have created new opportunities for private exchanges in the small and midsize employer market space.  New entrants into the benefits and HRIS space (Zenefits, for example) have disrupted the current benefits delivery market, and forward-thinking consultants have turned to private exchanges to help build out value beyond the benefits that they have traditionally provided.  Small and midsize business owners face increased administrative burdens as a result of ACA compliance, payroll/tax reporting (Section 6055 requirements), and financial considerations.  The Cadillac Tax will impact a large number or existing plans, and a private exchange can help employees navigate choices, evaluate options, and provide decision support tools and resources to effectively right-size benefit programs and (hopefully) reduce costs for employers and employees alike.

Challenges and opportunities

There are tremendous opportunities for employers and consultants who embrace private exchanges.  What was once considered the "future" has quickly become our "now", and with growth projections estimating that the private exchange marketplace doubling each year, the tipping point for private exchanges is near (it may be happening as you read this).  Clients may be considering a private exchange for a number of reasons – market factors (regulatory, financial, or competitive) – and all will drive considerable change in the near future.  Making private exchanges part of your business strategy is critical, and a solid understanding of private exchanges and the options available to clients will help consultants stay ahead of the curve.  A forward-thinking series of strategy meetings early in the benefit year can help benefit consultants bend the trend and set the course for the future.

Is a private exchange right for everyone?

Probably not, but it would be short sighted to not make it part of a long-term benefit strategy.  Private exchanges are creating a new market space and are transforming how benefits are delivered.  Will employers look to migrate to the new space?  Of course.  If done right, they will have carefully reviewed several considerations, many of which are familiar to consultants:

·         Will a private exchange help control healthcare costs? 
·         Will it help recruit and retain talent? 

·         Will a new platform help make a business more competitive and bring value to employees and customers? 

·         Will a private exchange provide a solution for ACA compliance and reporting?

 

Chances are the average employer will have these questions at some point.  Educating customers on private exchanges may well become the new "HDHP conversation" – the inevitable talk about something that they very well may need to adopt to stay afloat and relevant in today's benefit marketplace. 

How consultants win in the private exchange era

There is an endgame for consultants in the private exchange world – and it is a winning scenario for consultants.  Private exchanges help consultants build client value, and when done right, deliver some serious return on investment.  There is, however, a paradigm shift in the perceived role of the consultant.  Instead of finding and recommending carriers and/or products, the consultant now delivers the platform that will allow employers to set financial guidelines, and for employees to choose the benefits that fit their needs.  Think in terms of retail – instead of selling the products, the consultant sells the delivery model – they are the shopping mall, or more appropriately the "Amazon" of benefits.  The role of the consultant has changed, but for the better – in alignment with the evolving needs of customers, and growing the ever-important relationships in place with clients.

What three things can consultants do now to be on the leading edge of the growth curve in the private exchange era?

• Understand the value a private exchange can deliver. Private exchanges can help facilitate defined contribution models, help recruit/retain talent, streamline administrative processes, and ensure regulatory compliance.
• Learn about the private exchange options in your market.  Third party vendors tend to specialize in market spaces.  Bloom Health, Liazon, Maxwell Health, and PlanSource are all examples of established, national private exchanges that provide solutions for groups with 25 or more employees.
• Incorporate private exchanges as part of your value proposition to clients.  Depending on client needs, an exchange solution may be worth a conversation early in your planning cycle. 

The private exchange market is expected to double every year for the next four years, and will certainly change the landscape of our business.  Best of all, it is a model that supports consultants and the work we do for our clients.  Early adopters win in the end, and now is the time to jump on board - or at least understand your options.  It can change the way you educate, sell, and grow your business in the future.



Part one of this series was published on 11/17/2015, and focused on the history, growth, and future of private exchanges.  You can find Part One at http://businessaccelerated.blogspot.com

Find more articles and updates at http://runningatthespeedofbusiness.blogspot.com/ and http://businessaccelerated.blogspot.com/

 

 

Private Exchanges - Creating New Opportunities for Consultants - Part 1 of 2

Private exchanges are growing in popularity and membership, and that is expected to continue.  How can employee benefit consultants, employers, and employees adapt and succeed in the private exchange era?  This two-part series investigates the private exchange landscape, and what opportunities are emerging, particularly with small and midsize employer groups.

 What is a private exchange?

A private exchange is a platform that can transform the way employers and individuals review and select benefits.  Employees are offered a wide range of options and can choose the plan(s) that are right for them.  From an employer standpoint, a private exchange can help a group re-frame benefit presentations and choices to meet financial goals (defined contribution models), offer a broader range of benefits that appeal to more employees, and provide decision support that can help employees understand their needs and the benefits that can meet those needs.

A history of exchanges

Exchanges have been around for many years.  Technology has made the functional role of exchanges easier to implement, but the concept of a marketplace for benefits remains the same.  The Affordable Care Act has accelerated the growth of private exchanges for many reasons.  The employer mandate requires that employers offer health insurance to all full time employees, and employers need a scalable solution that can provide reach, education, administrative efficiencies, and will ensure compliance.  Upcoming regulations, such as 6055 reporting and the Cadillac Tax, will further accelerate the growth of private exchange models.
 
Expected growth of private exchanges

Until recently, there was low adoption of private exchanges, but there was a high level of interest.  That is changing quickly.  Accenture estimates that there are 6 million people enrolled in benefits via private exchanges in 2015.  That number, according to Accenture, is expected to grow rapidly, with 12 million enrolled in 2016, 22 million in 2017, and 40 million in 2018.
 
Established private exchanges

Large employers have been the primary growth drivers for private exchanges, but options for small and medium companies are starting to see value in what private exchanges can do for them.  The private exchange market had a large numbers of innovators and early entrants, but as the market matured we saw consolidation through mergers and acquisitions.  Some insurance carriers and brokerage/consulting firms have developed and/or purchased their own private exchanges, while there are a number of independent private exchanges that function as third party partners.
 
Future of private exchanges

The private exchange market is destined to grow rapidly in the next 3-4 years.  A large portion of this growth will come from individuals employed by large employers, but small and midsize employers are expected see growth as well.  Small and midsize employers have faced their own unique challenges and realities over the past couple of years.  Depending on the State, the Small Business Health Options Program (SHOP) exchanges have had limited success.  Further, small and midsize business owners need an integrated and comprehensive solution to support their benefits and HR functions, and a scalable solution that will grow with them.  Most of all, they want to focus on what they do best – taking care of their customers, creating opportunities for their employees, and growing their business.

 

Look for part two of this series on Thursday, November 18.  Part two will identify emerging opportunities in the small and midsize employer markets, particularly for benefit consultants.