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Portfolio > Alternative Investments > Private Equity

His company scares public exchange managers

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Richard Mann says he thinks private exchange companies really are coming, and coming in a big way.

“Exchanges are here now, and they’re growing,” Mann said in an interview.

Mann is an executive vice president at PlanSource, one of the benefits administration system companies behind the private exchange movement.

Some benefits market watchers, and players, have suggested that successful private exchange programs could destroy the Patient Protection and Affordable Care Act (PPACA) exchange programs, by attracting the younger, healthier, cheaper-to-insurance customers.

When Linda Blumberg and Shanna Rifkin looked at the PPACA exchanges’ small-group divisions for the Urban Institute, they found that one of the future terrors haunting exchange managers is the possibility that successful private exchanges could threaten the public exchanges’ viability.

Other benefits market watchers have questioned how many of the private exchanges now in operation really deserve to be called private exchanges, and how big the private exchange market is likely to get. When the National Business Group on Health released the results of a survey of large employers earlier this month, it found that only 3 percent of the participants expect to be providing health benefits for active employees through private exchanges in 2015.

Will private exchanges be the public exchange managers’ worst nightmare, or just a little gas?

Mann said he agrees that the percentage of employers using private exchanges now is low. The percentage will be bigger — but still small — next year, he said. But he said large amounts of private exchange capacity will be coming online soon.

PlanSource defines a “private exchange” as a system that gives the owner the ability to set up an online market for an employer quickly, with standardized plans presented in a standardized format.

PlanSource expects to help insurers, brokers and benefit plan administrators use its systems to set up administration services for about 250 employers this year. The company is also setting up a dozen private exchange systems for about a dozen insurers and large brokers.

Mann said the private exchange programs now in his company’s development pipeline could end up pulling in at least as many employers as the traditional PlanSource plan setup team now serves and, given the size of the owners, are likely to serve many more plans than PlanSource has been serving.

One of the company’s claims to fame is that it developed the system supporting the Utah Avenue H Small Business Health Options Program (SHOP) exchange. At press time, Utah may have had the only Patient Protection and Affordable Care Act (PPACA) SHOP exchange with a working enrollment website and fully functional administrative systems.

Mann said the key to having any kind of successful exchange is to get the back-office systems working properly. “There are a lot of moving parts,” he said. 

Mann said Avenue H managers have learned that working with brokers is critical. Avenue H prefers to work with employers with brokers, because brokers do a lot of work and add a lot of value, Mann said.

“I would say the outlook for brokers is really good,” Mann said.

Good brokers who have adapted to change “have had the best years of their career this year,” Mann said.

Health insurance commissions may fall, but brokers who are using a good private exchange system will be able to make up for the drop by selling a wider range of products, Mann said.


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