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First Quarter 2016

Exchange

About Innovative Health and Benefit Marketplaces

The Choices People Make

(And Their Implications For Private Exchanges)

Intersection of Private Exchanges and Self-Funding

Private Exchanges Offer Small Employers Big Benefits istock.com/80171107

The Official Magazine of

www.theihcc.com


INSIDE FEATURE 13 The Choices People Make How employees make health plan decisions and the role of private exchanges in those decisions An increasingly diverse workforce. Health care costs that continue to significantly outpace inflation. Employers are finding themselves introducing a broad array of new health plan options in order to meet these needs and manage cost increases. Because of these expanded choices, employees need to be more knowledgeable and assume more responsibility for decisions regarding their health care – decisions that become more complex with each additional option.

DEPARTMENTS 7

STATS & DATA What Employees Know About Private Exchanges (That Their Employers Don’t)

By Alan Cohen, Co-founder and Chief Strategy Officer, Liazon

By Sherri Bockhorst and Andrew Mackenzie, Willis Towers Watson

istock.com/rendeep

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Publisher’s Letter CEO and Publisher Doug Field covers the latest trends in private exchanges and shares what’s happening at The Institute for HealthCare Consumerism around exchanges.

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Briefs & Innovations t t t t

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9 SMALL EMPLOYERS Private Health Exchanges Offer Small Employers Big Benefits

By Joe Laurin, President, Fidelity Health Marketplace

10 SELF-FUNDING The Intersection of Private Exchanges and SelfFunding

By Jeff Yaniga, Chief Revenue Officer, Maestro Health

11 BROKERS & ADVISORS The Private Exchange Market: A Different View On Adoption

By Scott Stauffer, Private Exchange Director, Benefit Advisors Network

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PUBLISHER Exchange www.theihcc.com

Understanding Employee Choice in Private Exchanges

VOLUME 3 NO. 1 | FIRST QUARTER 2016

Published by FieldMedia LLC 292 South Main Street, Suite 400 Alpharetta, GA 30009 Tel: 404.671.9551 • Fax: 770.663.4409 CEO

If you’re reading this, there’s a good chance you’re at our first private exchange-specific event of the year — 2016 Private Exchange FORUM Dallas. If so, welcome! We appreciate your support of and collaboration in this growing event. If you couldn’t make it down to Dallas, remember that you can catch many of the sessions through our IHC University program. Videos are typically available on our website within four weeks of the end of

Doug Field 404.671.9551 ext. 101 ¡ dfield@ theihcc.com CHIEF MARKETING OFFICER

Andrew Dietz adietz@theihcc.com MANAGING EDITOR

Jonathan Field jfield@theihcc.com SENIOR EDITOR

the conference. Whether you attended the Dallas event or not, you will certainly want to make note of our second Private Exchange FORUM of the year. In September, we’ll be heading back to Baltimore’s Inner Harbor for the second annual Private Exchange FORUM Baltimore. Visit our conference website today for access to $99 super saver rates. In this first issue of 2016, we’re excited to feature expert opinions from many of the major players in private exchanges — from Maestro Health to Willis Towers Watson to new entrant Fidelity. In their respective articles, expert contributors from both Liazon and Willis Towers Watson delve into the employee decision-making process inside a private exchange. At our conferences, a major point of contention has always been how much choice is the right amount of choice. Many HR/benefits leaders have publicly doubted the average employee’s ability to select the right level of benefits for himself and/or his family. The survey-backed insights here shine some light into that area and will doubtlessly answer many important questions for employers looking into private exchange adoption.

Heather Loveridge hloveridge@theihcc.com RELATIONSHIP MARKETING MANAGER

JJ Atherton jjatherton@theihcc.com DIGITAL MARKETING MANAGER

Eric Bruce ebruce@theihcc.com ART DIRECTOR

Kellie Frissell 404.671.9551 ext. 107 ¡ kfrissell@fieldmedia.com CHAIRMAN OF IHC ADVISORY BOARD

Ronald E. Bachman, CEO, Healthcare Visions EDITORIAL ADVISORY BOARD

Kim Adler, Allstate; Diana Andersen, Zions Bancorporation; Bill Bennett; Doug Bulleit, DCS Health; Jon Comola, Wye River Group; John Hickman, Alston+Bird LLP; Tony Holmes, Mercer Health & Benefits; Marc Kutter, Aflac; Sanders McConnell, TSYS Healthcare; Roy Ramthun, HSA Consulting Services LLC; John Young, Consumerdriven LLC WEBMASTER

Elsewhere in these pages, Jeff Yaniga at Maestro Health looks at the intersection of self-funding and

Tim Hemendinger timh@fieldmedia.com

private exchanges; Scott Stauffer at Benefit Advisors Network gives readers a different view on market

DIRECTOR OF CONFERENCE SPONSORSHIP/ CORPORATE MEMBERSHIP/REPRINTS

adoption; and Joe Laurin at Fidelity, who just launched Fidelity Health Marketplace, provides insights on

Rogers Beasley 404.671.9551 ext 109 ¡ rbeasley@fieldmedia.com

the usefulness of private exchanges for smaller employers. To all of our contributors, we thank you for your time and your insights. To all of our readers, we hope

ACCOUNT MANAGERS

Michelle Gatehouse 404.405.3007 • mgatehouse@theihcc.com

to see you at one of our Private Exchange FORUM conferences this year. Visit PrivateExchangeFORUM. com for more information.

PARTNERS/ALLIANCES

Joni Lipson 800.546.3750 ¡ jlipson@fieldmedia.com HealthCare Exchange Solutions™ Volume 3 Issue 1 Copyright Š2016 by FieldMedia LLC. All rights reserved.

Sincerely,

Doug Field CEO/Publisher dfield@fieldmedia.com

HealthCare Exchange Solutions™ is a trademark of FieldMedia LLC. HealthCare Consumerism Solutions™ is published eight times yearly by FieldMedia LLC., 292 South Main Street, Suite 400, Alpharetta, GA 30009. Periodical postage paid at Alpharetta, GA and additional mailing offices. TO SUBSCRIBE: Make checks and money orders payable to HealthCare Exchange Solutions ™ magazine 292 S. Main Street, Suite 400, Alpharetta, GA 30009 or visit www.theihcc.com. Non-qualified persons may subscribe at the following rates: single copy $7.50; $75.00/yr in the U.S., $105/yr in Canada and $170/yr international. Please contact FieldMedia at 404.671.9551 or subscriberservice@fieldmedia.com for name/address changes. PRINTED IN THE U.S.A. HealthCare Exchange Solutions™ is designed to provide both accurate and authoritative information with regard to the understanding that the publisher is not engaged in rendering legal, financial or other professional service. If legal advice is required, the services of a professional adviser should be sought. The magazine is not responsible for unsolicited manuscripts or photographs. Send letters to the editor and editorial inquiries to the above address or to jfield@fieldmedia.com. Permission to reuse content should be sent to, jfield@ fieldmedia.com.

4First Quarter 2016*XXX5IF*)$$DPN*HealthCare Exchange Solutions™


©2015 WiserTogether, Inc. All Rights Reserved.

Who do you want helping employees make treatment decisions? There’s a better way to give people the information they need.

When it comes to choosing treatment options, after their doctor most people turn to friends and family. With WiserTogether, there’s a better way to decide. Our personalized, evidence-based tools guide consumers to treatment decisions that work best for them— personally, clinically and financially.

4 million data points. But maybe you should call Grandma, too. She’d like that.

Contact us to learn more: 202.503.3700 info@wisertogether.com http://wisertogether.com Clinical Evidence Personalized Treatment Comparisons Better Health Outcomes


NEWS BRIEFS & INNOVATIONS

NEWS BRIEFS Accenture: Eight Million Employees Enrolled in Private Exchanges for 2016 Benefits A new report from Accenture estimates that the number of people who enrolled in private exchanges for 2016 increased 35 percent from last year, to approximately eight million, up from approximately six million in 2015. Accenture’s research indicates that the growth of private health insurance exchanges continues to be fueled by midsize companies with 100 to 2,500 employees. The rate of adoption among large employers did grow slightly in 2015, but many have been on the fence in determining whether to adopt private health insurance exchanges.

RedBrick Health Integrates Advanced Well-Being Platform into Towers Watson’s Private Exchange RedBrick Health announced it is expanding its relationship with Towers Watson’s OneExchange. RedBrick Health began providing integrated well-being services for the OneExchange group solution in January 2015 and will serve an expanded group of employer clients across such industries as hotels, media, retail, health care, business services, manufacturing and more for 2016. RedBrick provides a consistent wellbeing employee experience across all the group health plans offered on OneExchange. This means employees can choose a plan from any carrier and have a consistent well-being program that carries over year after year. The integrated rewards model provides flexible rewards that can fund employees’ health accounts or reward them in other ways.

Fidelity Investments Launches Fidelity Health Marketplace Fidelity Investments has announced the launch of Fidelity Health Marketplace, which offers one-stop access to health and wellness benefits to small and mid-sized businesses and their employees. Fidelity Health Marketplace offers employers the ability to choose from an extensive network of national and regional medical, dental, vision and life benefits in addition to tax-savings options and access to wellness tools and programs. Several customers in Massachusetts and New York are already using the marketplace. The platform uses hCentive’s WebInsure Benefits private exchange technology platform, which offers an integrated enrollment experience and pre-configured connections to a network of insurance carriers and a range of health and other ancillary benefits.

Aflac Teams with Liazon Private Benefits Exchange to Offer Group Products Aflac announced that it is partnering with Liazon to provide brokers working with large businesses nationwide more options for when and how they do business with Aflac. As a result of this agreement, approved brokers will now be able to offer Aflac’s group critical illness, accident and hospital indemnity plans through the Bright Choices exchange and other Liazon-powered exchanges – providing employers a way to provide their employees a broader range of choices to build a personalized portfolio of benefits.

Maestro Health Adds New Diversity Twist in Benefits with Kashable Partnership In response to widespread employer demand for greater diversity in their health benefits, Maestro Health has announced its partnership with Kashable, a socially responsible financing solution for employees. 6First Quarter 2016*XXX5IF*)$$DPN*HealthCare Exchange Solutions™

Expanding voluntary benefit offerings to include non-insurance products on Maestro Health’s innovative tech-meets-service platform, maestroEDGE, offers employers a holistic approach to better align the health and financial well-being of their employees.

CoreSource and Liazon Partner to Launch TPA Private Exchange Solution CoreSource, a national health benefits administrator, and Liazon announced a partnership to create a new third party administrator private exchange solution for companies. The online storefront will be stocked with self-funded health plan designs chosen by employers with help from their brokers, and employees will have the ability to apply defined contribution dollars to purchase coverage under their employer’s self-funded plan for themselves and their families. CoreSource’s offering will feature five high deductible health plan designs, five PPOs and two dental plan designs, as well as additional services, such as wellness programs that employers can incorporate into their self-funded health benefit plan and access to short-term disability income insurance.

Maestro Health Announces Explosive Growth; Expansion Fueled by Response to Employer Demand Maestro Health marked 2015 with record momentum by adding 158 new logos — a 45 percent increase in revenue over the prior year — and expanding deployments for existing customers on the maestroEDGE platform. There are several notable household names included in this growth, including Blue Cross Blue Shield of Arizona, DISH Network and Mazda via broker partners. 2015 witnessed a greater demand for an all-in health and benefits platform that could eliminate vendor juggling, reduce administrative burden and manage enrollment more intuitively. Maestro Health also grew its physical presence, with new office locations in Detroit and Phoenix, a facility expansion in Charlotte and approximately 81 new hires joining between January and December.

Willis Towers Watson Announces Retirement of Jim Foreman, Exchange Solutions Leader Willis Towers Watson has announced that Jim Foreman, managing director of the company’s Exchange Solutions business segment, will retire at the end of March 2016. Gene Wickes, currently co-leading the integration efforts for Willis Towers Watson, will succeed Foreman. During his tenure, Wickes has held several key leadership positions and served as a member of the Management Committee. Prior to the Willis Towers Watson merger, he was managing director for the benefits business, the company’s largest and most profitable business segment, for 12 years.

Array Health, GetInsured Partner to Provide Comprehensive Solution for Insurer-Led Private Exchanges Array Health and GetInsured have partnered to provide GetInsured’s individual solution on Array Health’s private exchange platform for insurer-led exchanges. The partnership will help insurers gain and retain current members as they move between group and individual coverage and give employers and consumers the flexibility they need. The combined solution delivers a tailored shopping experience for different types of consumers, from the experienced shopper who knows exactly what to purchase to the novice who needs more guidance and information to make a decision.


STATS & DATA

What Employees Know About Private Exchanges (That Their Employers Don’t) BY ALAN COHEN » CO-FOUNDER AND CHIEF STRATEGY OFFICER » LIAZON

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hen it comes to employee benefits, employers may be underestimating their employees. Our 2015 survey of employers and employees using Liazon Exchanges for their benefits enrollment yielded some interesting distinctions between what employers think about their employees’ experience and what their employees actually told us. While employer perceptions of how their employees view their exchange experience is favorable, it turns out employees are way more excited about being in the driver’s seat — and the variety, support and overall experience provided — than their employers believe. While 77 percent of employers believe their employees are satisfied with their exchange experience, a full 96 percent of employees reported overall satisfaction. We dug a little deeper to determine what specific factors delighted employees and here’s what we discovered:

Decision Support Just over half of the employers we surveyed felt their employees valued decision-support tools. But what employers aren’t realizing is that nine out of 10 employees found the recommendation and education provided to be helpful and nearly threequarters trusted the recommendation they received from the system.

Choice & Variety The fact that employees value choice came to us as no surprise in this year’s survey. Ninety-six percent of the employees we surveyed said they would rather choose their own benefits than have their employers choose for them. Seventy-six percent of employers told us they felt their employees were satisfied with the variety of products available to them on our exchanges. The reality was, 89 percent of employees said they were satisfied with their benefits choices available. This is an important finding for employers who use benefits as a retention tool because studies have found that the more types of benefits you offer, the more employees’ intent to stay with their company increases.1

Servicing When it comes to getting their questions answered enrollment process, employees are also more satisfied employers may think. Eighty one percent of employees employee service center helpful, while 50 percent of perceived this to be the case.

during the than their found our employers

Value for Benefits Dollars One area we found employers and employees to be in sync when it comes to private exchanges was in appreciating the value of the company’s contribution. More than 60 percent of employees are more aware of their company’s contribution, in line with their employers’ estimates. But there is still room for improvement as we believe that 100 percent of employers and employees should understand that the dollars a company spends on its employees’ benefits are a form of compensation.

Listening to Employees Some employers have been reticent to provide employee benefits through private exchanges for a number of reasons. But it’s not surprising that employees are the ones seeing the real advantages because when it comes down to it, benefits are about them. As individuals increasingly become more involved in these decisions, private exchanges are ideally suited to tap into this desire for knowledge by giving them an easy way to make better choices for themselves and their families. The message for those employers who have adopted a “wait and see” attitude when it comes to private exchanges is: wait no more. Your employees have spoken. It’s time for employers to accept the new reality not because we as an industry are telling them to, but because their own employees get that choice in benefits and the power to make their own decisions is the future. _________________________________________________________ 1 MetLife, 13th Annual U.S. Employee Benefits Trend Study, 2015, “Choice is the New Standard”

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SMALL EMPLOYERS

BY JOE LAURIN PRESIDENT FIDELITY HEALTH MARKETPLACE SM

Private Health Exchanges Offer Small Employers Big Benefits

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mall employers are truly the lifeblood of the U.S. economy, part of the employer that they might be doing something wrong and employing almost half of the private sector workforce. putting their organization at risk. Entrepreneurship is also thriving today, as 27 million workingOne way many employers have tackled these concerns is by age Americans — nearly 14 percent of the workforce — have started making the switch to private exchange technology. Until recently, or run new businesses1. Yet, when it comes time for these small this type of technology was only available to large employers who employers to select and administer benefits, the lack of real options could afford it. But now, with the advent of solutions designed to can feel like a hurdle to long-term success. accommodate their unique needs, the tide is shifting in favor of small Small employers know that in order to retain and attract top employers. talent, a competitive benefits package is crucial. The stakes are Our Fidelity Health MarketplaceSM is one such solution. Fidelity’s especially high for these employers, since landing and keeping the roots are in helping employers — regardless of their size — offer right talent can truly mean the their employees the variety of difference between success and products they need to help them A theme I hear from the small failure. However, offing more feel secure about their financial benefits options often means a future. We’ve created Fidelity businesses we talk to is that they greater administrative burden in Health Marketplace in order to the form of additional forms to offer the same level of support know they should offer more choices, complete and benefits to track. and choice when it comes to especially when it comes to health This often puts them out of health and welfare benefits. Our reach for an already stretchedplatform simplifies the process coverage options, but are hesitant to too-thin HR person or team. of benefits administration and One bit of lore I’ve heard do so. They simply don’t have the tools enrollment, and creates an is that small businesses are integrated portal so employees and help necessary to truly understand can review their financial and okay with the “one-size fitsall” benefits options they have health benefits all in one place. how these products work now. Let’s be clear — small The technology connects employers want options for directly with the providers on our themselves and their employees. platform, eliminating paper forms In fact, employers with fewer than 1,000 employees are much more and providing employers with real-time reporting tools. Our technology likely to be shopping for a better health insurance option than their helps the employer track benefits activity and eases both administrative larger counterparts2. and compliance-related burdens. A theme I hear from the small businesses we talk to is that they We are offering an overdue and much needed solution to the know they should offer more choices, especially when it comes to engine of our economy — busy, supremely talented business owners health coverage options, but are hesitant to do so. They simply don’t and HR professionals who wear many hats. We are excited to see have the tools and help necessary to truly understand how these Fidelity Health Marketplace help these professionals spend less time products work — let alone help employees make the right choices for on benefits administration so they can work on realizing their business their own personal health and financial situations. Instead, employers objectives — whether it is to be a thriving small business, or world stick to what they (and their employees) know, and miss out on other, domination. potentially desirable options. _________________________________________________________ From a regulatory and compliance perspective, small employers 1. http://www.babson.edu/Academics/centers/blank-center/global-research/gem/ are at a disadvantage as well. The unfortunate truth is providing health Documents/GEM%20USA%202014.pdf coverage for 10 or 10,000 employees comes with a host of compliance 2. http://kff.org/report-section/ehbs-2015-section-fourteen-employer-opinionsand-health-plan-practices/ concerns that can’t be ignored. Small employers are often left on their own to figure it all out. This leads to frustration and uneasiness on the Photo by Stuart Darsch

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SELF-FUNDING BY JEFF YANIGA CHIEF REVENUE OFFICER MAESTRO HEALTH

The Intersection of Private Exchanges and Self-Funding

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n the post-ACA world of private exchanges and self-funding, two trends continue to proliferate: private exchanges continue to add employees (albeit slower than the early predictions); and, self-funding continues to be a key strategy for employers. Both offer “catered� experiences, but when the two strategies intersect, the results can transform employee health and benefits.

The Intersection of Employee Choice and Employer Decision Making

they need, avoiding wasted money on over-insuring, or even worse, not having enough coverage for an unexpected claim. A self-funded exchange helps employees and employers control cost. When executed correctly, employers can offer rich benefits or address their budget needs by adjusting benefits design, rather than simply reducing benefits. The best self-funded service teams deliver strategies that observe how employees are using benefits and nudge them toward the appropriate care. Great self-funded strategies guide employees beyond the day they enroll. Today’s innovators drive wellbeing, education and utilization the other 364 days of the year. Effective self-funding expertise drives cost control in addition to fully-insured claims reserve surcharges.

A self-funded private exchange offers greater choice, easier decisions and more control for both constituents. No two employees are ever the same. Recognizing that they have different needs is critical to an optimized benefits strategy. Private exchanges connect employees (the buyers) and benefits suppliers A Smarter, More Informed Benefits Experience (the sellers), in a similar way that Amazon.com might connect a If claims data is the treasure map for employees and employers, retailer with an online shopper. Benefits, specifically the process of the private exchange is where the “X� marks the spot. choosing benefits, can be very complex. As part of this buyer-seller When self-funding and private exchanges intersect, one has the engagement, technology helps power to inform the other. Because simplify the process for buyers claims data is the property of down to a few mouse clicks the employer in a self-funded The best self-funded service teams and answering a few relevant model, the HR professional has deliver strategies that observe how questions. The result: a peoplecomplete visibility into benefits friendly user experience, or what usage and can provide the employees are using benefits and we in the industry refer to as employee with greater support “decision support�. Regardless and guidance when it comes nudge them toward the appropriate of what you call it, it’s all about to wellness and future plan care. Great self-funded strategies guide selection. Innovative, peoplegranting employees more control over their benefit needs. friendly private exchanges serve employees beyond the day they enroll. Similarly, no two employers information back to employees are ever the same. Limited by via a personal online dashboard, the rigid plan designs found in the creating a richer user experience. fully-insured world, self-funding frees employers to align health benefits Actionable knowledge is where transformation happens. When with company goals, giving them greater authority over their benefit self-funding and private exchanges intersect, the model can educate requirements. and guide employees toward new benefit products and plan options, as well as empower them to take immediate action in the best interest Greater Selection at the Right Price of their health. At the same time, employers can optimize their benefits When private exchanges are done right, employees benefit in strategy with greater cost control, more options and deeper insights. major ways. Whereas benefit plan decisions used to be limited to “yes� Overall, the entire benefits process becomes smarter, personalized and or “no� selections, employees now have the opportunity to fill their more efficient for everyone involved. cart with the benefit “groceries� they really need. For some, a high Currently serving as chief revenue officer, Jeff Yaniga architects Maestro’s business deductible plan makes perfect sense. Others have needs that mandate development, innovation and company growth. With his invaluable private exchange implementation “know-how�, he is an invaluable asset to the team. Over the past a richer and more comprehensive plan. For example, growing families few years, Yaniga has become a well-known thought leader in the private exchange might add supplemental life insurance to their cart. Active young adults space—speaking at over 30 conferences. may protect themselves with an accident policy or pet insurance. When given the opportunity, employees are capable of buying exactly what

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BROKERS & ADVISORS BY SCOTT STAUFFER PRIVATE EXCHANGE DIRECTOR BENEFIT ADVISORS NETWORK

The Private Exchange Market: A Different View On Adoption

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ast year, six million Americans used a private exchange to enroll Here’s Why in employer benefits, which is double the number of 2014 Private exchanges do give organizations a chance to fix and enrollees, according to a predict health care costs, offer report by Accenture. Accenture more choice to employees and Private exchanges do give organizations reduce administrative costs. — as well as other industry analysts — expects this growth Here are a number of situations a chance to fix and predict health care trend to continue into 2018. where private exchanges can be The report projects exchanges a good solution: costs, offer more choice to employees to enroll 12 million employees and reduce administrative costs. in 2016, 22 million in 2017, and t /FFEUPNBOBHFCFOFmUT 40 million in 2018. DPTUTOPX Part of the reason for the Companies that are under substantial increases can be attributed to the positive feedback from pressure to reduce costs immediately often look at private users. The Deloitte Center for Health Solutions conducted an online exchanges and their defined contribution funding mechanisms survey of 700 employers last year, finding only eight percent of those as a way to fix their contribution to benefits while maintaining or employers who moved to a private insurance exchange (11 percent even increasing benefit choices for employees. of respondents) were not satisfied with their current exchange — t $PNQPTJUJPOPGXPSLGPSDF meaning the overwhelming majority were pleased. Most said the private Organizations with diverse employee demographics find it exchange has had financial benefits, with only one in five finding their difficult to design a benefits program that is right for each private exchange has not reduced costs of employee insurance. employee. Because most private exchanges offer a number These findings are in line with a case study presented by Sears, of medical plan options as well as a full suite of ancillary and where Dean Carter, the company’s chief human resources officer, said voluntary products, employees have the ability to design the retailer saved $38 million in the first year that it used a private individualized benefit packages. exchange. t *OUFHSBUJPOQPJOUGPSDBSFNBOBHFNFOU XFMMOFTTBOE JODFOUJWFSFXBSET Why All The Buzz Now? The combination of a PE with robust employee communications The pension market provides an interesting analogy. The capabilities coupled with effective cost management vendors tipping point for employers moving to a defined contribution pension has a better ability to reduce the cost of care than any of these marketplace occurred in the mid-eighties. There were three driving vendors on their own. forces: 1) a significant change in regulations — the creation of the 401k; t *OUSPEVDFJOOPWBUJPOT 2) increasing retirement cost burdens; and 3) the advent of technology As mentioned previously, PEs offer employers an excellent that created more flexible and consumer friendly investment platforms opportunity to offer plan, network or product innovations in a developed by companies like Fidelity Investments. But, after an initial choice environment. As part of a long-term strategy, employers surge, DC pension plan participation took a slow and steady climb. can steer employees into more cost effective medical plan In the health benefits market, employers now face increased options or ancillary/ voluntary benefits that meet specific compliance responsibility with the advent of the ACA, continued employee needs. escalation of medical costs, and an employee base that wants more control over how benefit dollars are spent. So, while the environment These situations, for the most, lead to a value proposition may appear to be right for significant growth in private exchanges and that is more geared to employee engagement and attracting and defined contribution funding for health benefits, we believe it is more retaining talent. This is what we believe to be the real value of private likely that the growth trajectory will follow more closely with the DC exchanges. pension market.

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The Choices People Make How employees make health plan decisions and the role of private exchanges in those decisions

istock.com/rendeep

BY SHERRI BOCKHORST AND ANDREW MACKENZIE » WILLIS TOWERS WATSON

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n increasingly diverse workforce. Health care costs that continue to significantly outpace inflation. Employers are finding themselves introducing a broad array of new health plan options in order to meet these needs and manage cost increases. Because of these expanded choices, employees need to be more knowledgeable and assume more responsibility for decisions regarding their health care — decisions that become more complex with each additional option. Growing complexity is one reason employers are adopting private exchanges as an alternative to self-managing their benefits programs. Employers adding options to their existing benefit offerings — for example, account-based health plans with high deductibles or high-performance networks — worry that employees will be overwhelmed and end up making poor decisions. Exchanges with well-designed decision support can provide employees with the choice they want and the guidance they need to personalize their benefits. Providing effective help is the job of the exchange provider, and it’s up to the employer to select the right exchange solution. In our experience, employers today place significant emphasis on the science of designing and pricing health plans, but do not apply the same rigor to better understand their employees as health care consumers. In the dynamically evolving private exchange landscape, this understanding is critical.

Choice overload — the concept that individuals struggle to make a good decision, or even any decision, when presented with too much choice — is a well-researched phenomenon in behavioral economics, and we would expect to see this in health plan decisions. Voice of the Consumer Towers Watson — now Willis Towers Watson — fielded an online survey on health plan consumerism among U.S. employees to simulate choice in health plan elections. The Medical Plan Election survey was administered in March 2015 to more than 5,000 people between the ages of 21 and 64 currently enrolled in employer-sponsored health plans. Areas of inquiry included: • Do employees have the ability to handle significant choice of health plans? • How do different levels of health plan literacy influence their choices? • How does decision support influence their choices? For the simulation survey, respondents were randomly placed into one of four groups. Two groups designed their own plans using a dashboard in an open-choice environment while the other two chose plans from a menu of discrete options. Two groups had decision support — including term definitions and an expense calculator that showed the minimum, maximum and expected total costs associated with each plan design based on the respondent’s utilization expectations and health status. The other two groups had no decision support. HealthCare Exchange Solutions™ I www.TheIHCC.com I First Quarter 2016

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Each plan consisted of the following design elements: deductible, prescription drug co-pay, office visit co-pay, coinsurance and out-of-pocket maximum. The true premium of each plan was actuarially equivalent, but respondents received a randomized subsidy amount to mirror a monthly contribution comparable to traditional employer-sponsored contributions. As part of the survey, respondents’ health plan literacy was measured in two ways: They were asked a direct question about how much they knew about health insurance compared to the rest of the population. They were given a brief, five-question health insurance quiz.

What We Learned Our research revealed the following top line findings1.

1. Choice is good, but it must be guided Our research reinforced that employees need choice to account for their wide range of health plan needs and financial preferences. We also know they like having choice. Separate from the simulation research, satisfaction surveys of employees enrolled in Willis Towers Watson’s private exchange solutions show that choice is consistently the #1 most-liked feature; 96 percent say they prefer to choose their own benefits. Our research showed that while employees like choosing their insurance plans, they tend to prefer and are better equipped to handle a discrete menu of plan choices over the ability to completely design their own health plan. Choice overload — the concept that individuals struggle to make a good decision, or even any decision, when presented with too much choice — is a well-researched phenomenon in behavioral economics, and we would expect to see this in health plan decisions. In our survey, we asked each respondent how well he or she understood the plan choice they made in our simulation. Individuals in the discrete-choice environment indicated greater levels of satisfaction and understanding than individuals in the open-choice environment.

2. Low health plan literacy interferes with employees making decisions that align with their needs and preferences In our research, 70 percent of respondents could not answer two basic questions about how plan design would impact their out-of-pocket costs. This suggests a pervasive lack of understanding about how health insurance plans work; and that without guidance, most employees likely would be unable to accurately assess how plan design would protect them from out-of-pocket expenses they might not be able to afford. For example, employees with low health plan literacy tended to focus primarily on their monthly share of plan costs instead of the overall costs of the plans they chose, compared to employees with high health plan literacy. As a result, in the open-choice environment, employees with low health plan literacy chose plans with an average monthly contribution of $146 and a $2,130 deductible. Based on their unique design choices, utilization expectations and health status, these employees had an average expected total medical cost (contributions + out-of-pocket costs) of $5,760 according to our cost calculator. In contrast, employees with high health plan literacy chose plans with a higher average monthly contribution of $173, but a lower $1,350 deductible. These employees had an average expected total medical cost of $4,647.

3. Not surprisingly, employees are influenced by real-time decision support Research studies have shown that employees do not approach health plan election in an analytical way, thinking about their expected utilization and mapping out expected costs and associated risk under each plan 14First Quarter 2016*XXX5IF*)$$DPN*HealthCare Exchange Solutions™

design. Instead, they tend to choose plans based on advice from a friend, familiarity with the plan, recommendations and branding. However, they are also influenced by real-time decision support. In our simulation survey, we observed differences in plan election behavior for respondents presented with decision support and recommendations embedded in the survey compared to those who were not. In particular, respondents in certain groups — for example, lowincome families or those expecting a pregnancy — were very sensitive to decision support. (For more detail, see our report on micro-segmentation. Additionally, respondents tended to be anchored by an initial default plan design, even though it was randomized. For example, in the open-choice environment, we mapped the initial randomized plan design and associated contribution to the final choice respondents made, and found a strong correlation between the initial contribution and the final contribution of the designed plan. (For more detail, see our report on The Paradox of Decision Support in Health Plan Choice.) Based on our survey results, we believe that decision support during the selection process helps employees choose plan designs more aligned with their true preferences by presenting more information, more accurate cost expectations and the ability to compare costs across plan options in

Based on our survey results, we believe that decision support during the selection process helps employees choose plan designs more aligned with their true preferences by presenting more information, more accurate cost expectations and the ability to compare costs across plan options in the moment. the moment. Additionally, in our satisfaction surveys of employees enrolled in our exchanges, 92 percent say that the information they received during the selection process helped them make informed choices.

Implications for Employers Our research showed that while employees need and want choice, most do not fully understand how health plans work, making it difficult for them to make the most appropriate choice for themselves and their families. Employers today are providing employees with education and guidance, but it is likely presented primarily through primers, enrollment guides and FAQs offered in traditional print and online formats and disconnected from the actual health plan decision-making and enrollment process. Our research paints a picture of the optimal health plan election environment as one that provides meaningful choice and proven decision support tools that provide real-time, step-by-step guidance in the form of definitions of key terms, cost calculators and ultimately, a small set of recommended options tailored to each employee’s needs. • Private exchanges can play this role. When evaluating options, we advise employers to consider the following questions: • Is decision support embedded within the decision-making and enrollment flow? • Is there a dynamic recommendation engine that can quickly gather data and produce recommendations individualized for each employee and their family based on health and financial needs?


Does the decision support have a track record of results in areas such as employee satisfaction and outcomes, as demonstrated by the choices made?

If the answer to these questions is “yes,” employers can have greater confidence that their employees are equipped to make decisions that are right for them from an expanded array of options.

Sherri Bockhorst is a managing director of Willis Towers Watson’s Group Exchange business. Andrew Mackenzie is a senior actuarial analyst of Willis Towers Watson’s Health and Benefits consulting business.

________________________________ 1 For access to complete findings and insights, visit Understanding How Employees Make Their Health Plan Elections.

HealthCare Exchange Solutions™ I www.TheIHCC.com I First Quarter 2016

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HealthCare Exchange Solutions - 2016 1st Quarter Issue  

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