Q&A with Chris Duncan

What’s driving the growth in private health exchanges?

Dozens of studies say private exchanges are an important option for employers in solving for cost, complexity and compliance in the face of rising medical care costs and implications of the Affordable Care Act, particularly the excise tax. I look at private exchanges as a mainstream tool for our consultants in solving benefits challenges companies face in a post-ACA environment.

One, companies need to have more control over the costs, and private exchanges provide that, particularly in a defined contribution setting. Two, employers are looking to drive more of the decision making to the employees, which results in behavior change by employees in consuming medical care more cost effectively. The third thing is that typically understaffed HR functions are totally overwhelmed with the compliance and the reporting that comes out of the ACA. Challenges in cost, complexity and compliance are the three things often most effectively addressed within a private exchange environment.

How do private exchanges differ from the state and federal ones?

The public exchanges typically offer only medical products but are not necessarily enabling an informed choice for employees on which medical products, combined with the other benefits solutions like critical illness, cancer, disability, and life insurance, are the best for their personal medical risk and financial situation.

You can’t just solve for medical insurance decisions in a vacuum when the standard medical products are high-deductible payouts that most people can’t afford anyway. The federal exchanges basically stock the shelves with basic medical products, tell you what the subsidy is and you’re on your own.

Good private exchanges don’t do that. They support the employee and family in making a personalized benefit plan decision through education, communication and decision support tools in an online environment and, in many cases, access to licensed call centers staffed with people who know something about benefits to walk you through the process.

What has the experience been so far on private exchanges?

We’re seeing very rapid growth. It’s gone from being an innovation with early adopters a few years ago to a strategic option that many employers want to consider or implement. We’re trying to figure out which ones are the best, which ones can get executed most effectively and how to communicate it most effectively with employees. It’s mainstream now.

What makes an effective exchange?

A good private exchange addresses the longer lead time of effective communication and education for the employees, provides multi-modal means of tapping into the exchange, great decision-support tools that help the employee and family members make informed, optimized decisions on what set of medical and other benefits are best for their time of life, financial risk capabilities, and medical needs. Once they do that, once they have a good experience, they really buy into the concept. Mess that up, and it’s going to be very difficult.