Private Health Care Exchanges Meet Employers' Goals

“Fidelity’s recent launch of a private health care exchange validates the usefulness of private exchanges in the small and mid-sized employer market,” says Ashok Subramanian, CEO and co-founder of Liazon, a Willis Towers Watson company, and operator of the Bright Choices Exchange.

Subramanian tells PLANSPONSOR that 80% of Liazon’s clients have less than 1,000 employees, putting them squarely in the small and mid-sized employer camp. Liazon provides software, administrative support, call center and back office support, as well as products and programs through its Bright Choices Exchange as well as other white-label exchanges nationwide. Using Liazon, brokers, consultants or employers can adopt a private exchange in a turnkey approach.

According to Subramanian, the decision to adopt a private exchange for health benefits offerings always starts with the objective of the employer. Most employers are looking for greater cost predictability, to enable employees to have a personalized approach to employee benefits, and to simplify or outsource key functions in a highly regulated environment, he says.

Private exchanges allow employers to adopt a defined contribution (DC) approach to paying for health care, helping to manage costs. They also give employees choices in plans instead of what the C-suite or HR may have chosen, and administration is simplified, he adds.

While there are a number of larger employers using private exchanges, the biggest growth in the market has been in the less than 10,000 employee space, Subramanian says. The reason for this goes back to the three goals. “Those in in the small to mid-market have bigger cost problems and fewer tools to address them,” he notes. “It is also harder to offer more choice with a smaller company and benefits team; large employers have more staff to do administration in house. So, private exchanges naturally align with greater pain points for the small and mid-market.”

For many employers, the reason for adopting a private health care exchange was to try to avoid the excise tax on high-cost health plans (Cadillac tax) now set to go into effect in 2020. Subramanian says this is still a viable approach if employers are able to steer employees to select low-cost plans.

However, he notes that with the delay of the Cadillac tax effective date from 2018 to 2020, employers are now considering the possibility that it will go away altogether and focusing less on it than they were before. “They are now in a wait-and-see mode,” Subramanian says.

Finally, he says Liazon thinks the benefits industry will increasingly see more of a convergence between health care and retirement, and he revealed that Liazon has started a pilot program where employees can take some of the dollars allocated for health care and put them into retirement savings.