Shandon Fowler doesn’t really expect health insurers to “go beyond private exchanges” this year.
The director of marketplaces at Benefitfocus Inc. (Nasdaq:BNFT) spoke at a session with that title last week in Nashville, at the America’s Health Insurance Plans (AHIP) annual meeting. But he was thinking less about insurers selling health coverage through robots, or mental telepathy, than about insurers thinking about private exchange options in a clearer, more down-to-earth way.
“We’ve seen a pretty solid shift in thinking, from, ‘If we want to participate’ to ‘where do we want to participate,’” Fowler said in a recent telephone interview. “I think private exchanges are a permanent fixture on the benefits landscape.”
Benefitfocus has been helping health insurers handle member enrollment, sales and plan administration through electronic systems since 2000. It introduced a system for helping employers provide “defined contribution” health benefits programs, or giving employees cash that they could use to buy their own health coverage, in 2002.
Marsh & McLennan Companies Inc. (NYSE:MMC) invested in the company in February, to advance the efforts of its Mercer unit to sell life and disability insurance products through private exchange programs.
Fowler said he sees private exchange managers moving beyond struggling to help potential plan suppliers and coverage buyers understand what a private exchange is, or why anyone might want to use an exchange.
Today, he said, the exchange managers are trying to compete for the attention of more sophisticated insurers and plan sponsors by setting themselves apart.
For a look at some of the ways Fowler sees the exchanges trying to differentiate themselves, read on.
1. Converting dream features into actual features
The Patient Protection and Affordable Care Act (PPACA) public exchange system has had famous problems with getting its Small Business Health Options Program (SHOP) business up and running.
Private exchange builders have their own challenges with rolling out features, and insurers and benefits buyers may prefer to go with builders that have already delivered on their promises, Fowler said.
2. Offering products other than major medical and dental
Mercer made a point of talking about use of private exchanges to sell life insurance and disability insurance when it invested in Benefitfocus, and Fowler said he thinks offering benefits other than major medical is another way for exchanges to stand out from the crowd.
Some observers have reported seeing sales of non-medical benefits through the private exchanges start slowly.
But Fowler said he thinks private exchanges could soon start to add voluntary, employee-paid products such as wellness plans, prepaid legal plans and telemedicine services packages.
3. Controlling antiselection problems
In the past, managers of earlier efforts to help groups of customers team up to buy health benefits failed because of problems with risk.
The lowest-risk buyers flocked to the issuers with the lowest prices and the skimpiest benefits, or left the markets altogether.
The highest-risk buyers glued themselves to the issuers with the best benefits and promptly killed them.
The antiselection has been an even more difficult problem in the health insurance market than in other types of markets, such as the life insurance market, because concerns about ethics and privacy make efforts to have the buyers, the sellers, the exchange managers or government entities develop and enforce standards particularly challenging.
One symptom of the antiselection problem: The type of entity that marketers now call an “exchange” has gone through many different names.
Organizers have called the entities cooperatives, discount clubs, buying clubs, multiple employer welfare arrangements, purchasing coalitions, purchasing alliances, and, now, exchanges and marketplaces.
Eventually, users of the new generation of exchanges may spend less time asking about the features of an exchange that make it pretty and more about the features that keep it stable.
Fowler said he thinks private exchange players are already thinking along those lines.
“I definitely hear people talking about risk management,” Fowler said.
Image: TS Photo/Amy Donovan