Six years ago, Alan Cohen had a crazy idea.
The idea was simple, yet powerful: Let employees choose the health insurance plan they want, rather than having their employer do it for them. It would be done by allowing workers a fixed amount of money from their employer to spend in an online marketplace where they could purchase an array of benefits.
Cohen had worked in the benefits world long enough to know the ins and outs of insurance — his resumé includes stints at CIGNA, Prudential and Mass Mutual, as well as time spent as CEO and co-founder of Online Benefits, a benefits management and communication technology firm — but the light bulb came on, he says, when he finally started thinking about benefits through a “consumer lens.”
“When you look at it like that, it’s so obvious,” he says.
“Shopping for health insurance is just as personal as the clothes we wear, the cars we drive or the stocks we invest in,” he says. “We’ve got ourselves into a model where companies are making decisions on very personal things — and most often the wrong decisions — because people’s needs are so different.”
So, with Ashok Subramanian and Tim Godzich, Cohen decided to start a company and imagine a better way.
“We thought, if we had to re-create this [process] from scratch, what’s the best way to do this?”
In 2007, Liazon — and its Bright Choices private exchange — was born.
Though the idea was simple, it was also ahead of its time. Liazon was among the first companies to establish a private health insurance exchange, a trend that has since exploded. Consulting firm Accenture has since predicted as many as 40 million people would enroll for coverage via private exchanges by 2018. Today, less than 1 million are enrolled.
Liazon gained a foothold, and most recently caught the attention of executives at global consultant Towers Watson. In late November, the consulting giant bought the Buffalo, N.Y., based business for $215 million. Liazon will remain intact, doing business “as usual,” Cohen says, but now as a Towers Watson subsidiary.
Cohen, who continues to act as Liazon’s chief strategy officer with the deal, says partnering with Towers Watson will put his former startup in a whole new playing field by offering a significant growth opportunity.
“Being part of Towers Watson allows Liazon to reach a broader range of clients, invest more in product and technology, and leverage Towers Watson’s offerings to benefit all of Liazon’s channel partners,” Cohen says. “It’s an incredibly exciting time.”
We talked with Cohen about Liazon, the private exchange market, the Patient Protection and Affordable Care Act and where the health care market is going.
What is the idea behind Liazon and its exchange?
It’s built off the basic concept that benefits are really personal in nature. In fact, it’s a historical accident that we get personal coverage through our company, because everyone’s needs are so different.
Companies should create a budget that’s affordable for them — they should create a strategy — and allocate those dollars and let their employees pick whatever they want in this robust store that allows them to have control, personal accountability and the ability to make their own decisions.
Walk me through building the exchange.
What you need to build the idea is to have really great technology to help people make those choices about insurance and learn more than they know about insurance and health care and finances and help them become good consumers. You have to have an additional support system, so we built a really advanced support system that helps people make decisions. It’s almost like a personal financial advisor that you tell everything about yourself and they come up with a recommendation.
You also need to have really strong administrative systems, because now all these people are making these decisions on our system — and you have to feed that information to health plans, to insurance carriers, to companies and payroll deductions.
And you also need a call center, to answer people’s questions and help them work through the system. So that’s what we developed.