The Potential Value and Challenges of Public and Private
Health Insurance Exchanges for Employers
Donald P. Weber, Managing Director, PwC Larry S. Boress President and CEO
Midwest Business Group on Health
Mid-America Coalition on Health Care May 14, 2014
Agenda
• Employers and Health Benefits • What is a Health Exchange
• Introduction to the Private Exchange Evaluation Collaborative
(PEEC)
• Employer Views and Intentions Related to Private Health Insurance Exchanges - Survey Findings
• The Landscape of Private Health Insurance Exchanges – RFI
Results
• MBGH and PwC Services for Employers • Questions from Participants
PwC
Why are employers still offering health
care benefits and wellness activities?
• To recruit and retain talent
• To increase productivity by ensuring a healthy workforce
• To respond to a health system that fails to effectively focus on prevention or management of chronic conditions
• To take advantage of the 1000-2000 hours a year employees are at work, to educate, motivate, inform, train, and treat their populations • To incentivize workers to take responsibility for own their health
• To reduce lost work time and absenteeism by making preventive, acute and primary care services available onsite and easily accessible
The ACA and development of private health insurance exchanges do not change any of these factors for employers
Employer views on the value of health
• 95% of employers agree that there is a link between an employee’s health and their productivity
• 84% of employers believe that health benefits are a necessary cost of doing business
• 85% of employers view health benefits as an investment in human capital with a measurable outcome
PwC
Employer Challenges:
To reduce health benefit costs and improve
the health of the covered population
• Competing on a global market against non-US employers who don’t have to add the expenses of health benefits to their product/services • Facing a 2018, ACA 40% excise “Cadillac” tax on benefits above the
designated cost levels
• Ensuing access to primary care for their populations since in 2014, another 3 million people will have access to insurance
• Key areas of focus for employers:
– Chronic disease: 80% of health benefit costs
– Specialty drugs: projected to represent 40% of drug costs – Preventing illness
– Reducing risk factors
– Motivating workers to make better elective health care choices – Providing access to primary care and ancillary services
– Outsourcing benefit administration
• Competing on a
$0 $3,000 $6,000 $9,000 $12,000 19-34 35-44 45-54 55-64 65-74 75+ $1,776 $2,193 $2,740 $3,734 $4,613 $5,756 $1,414 $2,944 $3,800 $5,212 $6,636 $8,110 $2,565 $3,353 $4,620 $6,625 $7,989 $8,927 $5,114 $5,710 $7,991 $10,785 $11,909 $11,965
Employers need to find ways to reduce
risk of their covered populations
Keeping people healthy reduces costs
Annual Medical CostsMed Ris k Age Range High Non -P ar tici pa n t Low
PwC
Exchanges: Not a new concept
• Public exchanges are new – but not private exchanges
• Employers who offer multiple benefit options, have online portals and set the percent of their contributions have had an “exchange” for years • Even 3rd party private exchanges have been around for years
• Active exchanges in CA since 2005 • Retiree exchanges since 2005
• The difference now – exchanges are:
• Gaining traction – CEOs are hearing about them and asking HR if this should be part of the firm’s benefit strategy
• Becoming common language
• Viewed as 3rd party “benefits in a box” marketplaces • Leveraging more technology
• Offering to take over all benefit functions
What is a Health Insurance Exchange?
An on-line marketplace where individuals can purchase medical and / or other benefits
A health insurance exchange (HIX) can be:
• Public (run by government) or Private (run by industry) • Group or individual
• Fully insured or self-insured • Defined contribution, or not • Single or multi-carrier
• Health (medical, Rx, dental, vision) only options or many other coverage options (life, disability, theft identity, pet, legal, other voluntary)
• Limited or robust decision support
• Owner / steward of benefit choices and options decisions
• Integrated with consulting services, or purchasing coops, or other services • Integrated with health care services: wellness, care management, others • Integrated with certain benefit administrative functions
Private Exchanges for Actives: 4 different
types, many different value propositions
8
Carrier Broker / Consultant
Technology Pure Play
The private HIX market is getting crowded as new entrants jump in. With low hurdles to entry, we expect the market to expand before it contracts.
Key differences between Private Exchanges
Enabling consumerism • FI or SI • Integrated DC or other contribution approaches • Fees and commissions Financing • Single or multi-carrier • Pre-packaged options or flexible Store /Shelf • Health Only
• Life, disability, HSA/FSA • Voluntary: vision, pet, legal, telemed, etc. Products • Comparisons • Recommend-ation software • Education • Call centers • On-line chat Decision support Steward-ship Low High Care Mgmt. Low High
Exchange Technologies
Technology typically falls into two categories:
• Exchange specific technologies that are “vendor” agnostic - Key players include:
• Benefit Focus: powers several carrier exchanges, as well as Mercer and other brokers, and directly contracts with large employers
• bSwift: powers several state exchanges, just launched its own exchange, powers some brokers exchanges
• Liazon: distributes its own exchange and powers several large broker exchanges (Gallagher, Willis, Lockton, USI, HUB), was acquired by Towers in November 2013
• Build out of legacy ben-admin systems, often sold as a part of benefit outsourcing: Aon Hewitt, Towers and Buck
10
The promise of private exchanges
The promises of private exchanges
Cost Reduction through:
• Employees buy down / right size
• Reduced fees due to group purchasing
• Defined contribution
• Increased carrier competition
• Increased consumerism / engagement
• Insured products = reduced volatility
Network savings:
• Best in area discounts
• High performing / narrow networks
• ACOs, COEs
• Co-ops: PBM, Life, Disability, Stop Loss
Integrated care management and wellness Consistent experience over life
Reduced administration
Each private exchange is different and selecting the right exchange must be tied to an employer’s strategic objectives.
Other things you need to know
Costs: Exchanges have costs associated with them, but differ:
• Pure Play / Carriers: Employers pay a user
fee, plus an implementation fee. Some HIXs receive fees from vendors
• Consultant / Broker: sometimes collecting
an exchange fee, commissions from carriers and rebates from PBMs. They will likely require BOR letters.
Bundled Services: Consultants and brokers are presenting bundled products that include
consulting, reporting, co-ops, and will not unbundle
Independence: Firms concerned that their advisors sponsor exchanges
Benefit Selection
Participation Product
80 % Buy different health insurance, vast majority of which buy down
75% Dental 70% Disability
65% Buy HDHP, with 80% opening HSAs 45% Vision
40% Life
30% Supplemental health
10% LTC, Tele-Doc, Pet, wellness, etc.
12
*Data from Liazon 2014
Active Private Exchange Market
Exchange Owner Launch Clients /
Members 2014
Corporate Exchange Aon Hewitt 2013 18 / 600,000
Right Opt Buck 2014 3 / 225,000
Mercer Marketplace Marsh 2014 27 / 115,000
One Exchange Towers Watson 2014 3 / 45,000
Bright Choices Liazon / Towers 2007 500 / 100,000
Bloom HCSC, Anthem, BCBSM,
private
2009 240 / 90,000
Benefit Focus Benefit Focus 2001 280, 30+ / 20 M
bSwift bSwift 2000 200, states / 3 M
Retiree Private Exchange Market
Exchange Members Since Owner/consultant
OneExchange 500,000+ 2006 Towers Watson
Aon Hewitt Navigators 100,000+ 2010 AonHewitt
Connector Model 75,000 2008 United Healthcare
(Mercer) Retiree Health Access /
Aetna Marketplace
100,000+ 2006 HR Policy Assoc /
Aetna
RightOpt 50,000 2009 Buck Consultants
(Xerox)
Transition Assist < 20,000 2007 Transition Assist,
LLC / Marsh Conexis < 20,000 2009 Conexis HealthPlanOne Medicare Solutions 40,000 N/A HealthPlanOne, LLC 14 © Private Exchange Evaluation Collaborative, 2014 All Rights Reserved
What is fuelling the growth in private
exchanges?
• Continued increase on health care costs is forcing some employers to consider capping their contributions
• Intermediaries (consultants/brokers) see a new opportunity to expand their roles across the supply and demand chain, increasing /solidifying outsourcing and consulting opportunities. Carriers are following to protect their market share and to sell additional products
• Move to public exchanges may decrease payer margins causing payers to consider alternative solutions such as private exchanges
It has only just begun…
Private exchanges are gearing up for growth
- Value proposition will continue to evolve
- One size will not fit all: employers will use to pull back from and lean into providing benefits
- “Point of View” will extend beyond enrollment - Blurring of lines between PIX and health plans
New exchange technology is enabling rapid adoption
- Minimal barriers to entry
- Reduced implementation timeframes
- Can be more flexible and allow more customization
Transparency is more complicated
- Potential for hidden sources of expense, including PBM arrangements
- Need for fiduciary oversight
Private Exchanges are a disruptive market influence that have the
ability to change the way
employers provide benefits
16 © Private Exchange Evaluation Collaborative, 2014 All Rights Reserved
The Private Exchange Evaluation
Collaborative (PEEC)
• An initiative launched by four leading nonprofit business coalitions and a leading independent consulting house, not sponsoring
exchange:
– Employers Health Coalition, Inc.
– Midwest Business Group on Health
– Northeast Business Group on Health
– Pacific Business Group on Health
– PwC
• PEEC Objective:
– To solicit and provide unbiased, comparative information and support on private exchange strategies and purchasing decisions.
PEEC Employer Survey
Key Findings:
• Employers are considering exchange-based benefits strategies, but the path forward is far from clear.
• 45% of employers have implemented or plan to consider HIX
• 15% of employers are or will consider encouraging FTEs to go to the public HIX
• 58% would consider contributing to the public exchange if permissible • The greatest barriers to private exchange adoption relate to their
PwC
Employers are looking for comprehensive
services from private exchanges
Important to Employers Important to the Consumer & Shopping Experience
Flexible employee contributions
Tools that aid in plan selection
Cost of plan
options Ease of use
Administrative & claims advocacy Broad network access Implementation assistance Experience & track record Financial stability Employee communication support Call center/ Instant chat Variety of plan options & designs Reduce Benefits Staff’s Admin. Effort Data & Reports Level and transparency of fees
Portal with care management & claims info. Health education tools & library High performing networks
Key Findings:
Interest in private exchanges extends across industry segments and employer size while the importance of some requirements do vary.
• Almost half of employers expressed interest in considering private exchanges for full-time employees by 2018 with limited variation by industry
• Almost half of employers indicated that it was “very important” to have a self insured option with somewhat less interest by small employers
• Slightly more than one third of employers indicated that it was “very important” to have a fully insured option (about ¼ of larger employers )
• Over half of large employers indicated that flexibility within [their] contribution strategy is “very important”
• Other Interesting Insights:
– 69% of employers agree that it is very important to have independent advisors
– 25% of employers think that private exchange s will save them money
• 39% are unlikely to adopt a defined contribution approach in the next two years, but firms favoring DC are more likely to consider
implementing a private exchange
© Private Exchange Evaluation Collaborative, 2014 All Rights Reserved 22
PEEC Employer Survey
Key exchange benefit designs are considered important by employers
0% 20% 40% 60% 80% 100% Narrower networks
Ancillary products ACOs and new payment models Wellness incentives High performing networks Wide selection of plan designs Variety of health plan options Broad provider network access
PwC
Interest in Defined Contribution Varies
Very Unlikely, 21% Somewhat Unlikely, 18% Neither Unlikely nor Likely, 27% Somewhat Likely, 21% Very Likely, 4% Already Adopted, 9% 24 © Private Exchange Evaluation Collaborative, 2014 All Rights Reserved
PEEC RFI
Information solicited included: • Background, strategy, clients • Products and partners
• Consumer experience
• Administrative requirements / capabilities • Financial parameters
Information is preliminary
Current Initiative: So far, 25+ exchange responses in
database
Value Proposition
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Rx Options
66% 17% 17%PBM Options
Managed by Med. Carrier, no PBM choice Carved out, w/o PBM ChoiceCarved out, w/ PBM Choice
© Private Exchange Evaluation Collaborative, 2014 All Rights Reserved 28
The PBM deals are pre-baked, and inflexible except for custom stores. Some consultant / broker models leverage co-ops.
Member services available
30 © Private Exchange Evaluation Collaborative, 2014 All Rights Reserved
Decision
Ratings
Support
Factors
Considered
in
Not all provide eligible employee assistance
in accessing public marketplace subsidies
Option Customization and Funding
34 © Private Exchange Evaluation Collaborative, 2014 All Rights Reserved
Implementation Challenges
Implementation Timeframes vary by
Vendor and size of Employer
Reasons employers are cautious
about private exchanges
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0% 20% 40% 60% 80% 100%
Geographic variation in plan offerings Regulatory uncertainty Inconsistent with organizational culture Employee readiness Limited info for employers re: private…
Stability or track record of exchange… Stability of cost over time Immaturity of private exchange…
Strongly Agree Somewhat Agree
Other potential barriers to employer
adoption
0% 20% 40% 60% 80%
Requirement to be self insured Requirement to be fully insured Ability to limit carrier options Loss of indep. oversight of
experience rating Loss of control or stewardship Loss of flexibility in tailoring plan
design
Difficulty in exiting/changing exchanges
Observations
• Consultants / brokers exchanges are gearing up for significant growth related to exchange business. Some require use of their benefit’s administration and/or consulting services
• Implementation timeframe is less for those leveraged by exchange technology partners
• Exchanges leveraging exchange technology partners tend to be more flexible and allow more customization
• Exchanges are collecting several different levels of fees from employers and vendors.
– It is very important that employers understand the
revenue earned by the exchanges based on the services and products provided
• The PBM arrangements and potentially other cooperatives may be generating more exchange revenue.
– Understand requirements for vendors and products • Role of Exchange versus role of Carriers unclear
Midwest Business Group on Health and
PwC Services for Employers
• Understanding the private exchange environment and the current vendor products and services
• Evaluating if a private exchange is the “right” option for them
• Analysis and selection of a private exchange vendor using PEEC database and targeted RFP
• Research into the impact of private exchanges on their market or products
Questions
from
Participants
Contact Information
Larry Boress President & CEO
Midwest Business Group on Health 312.372.9090 ex 101 lboress@mbgh.org Donald P. Weber Managing Director, PwC 678.419.1417 donald.p.weber@us.pwc.com www.thepeec.com