Navigating Private Healthcare Exchanges

A number of state and regional associations are establishing private exchanges (marketplaces) for their members to offer them an option as the Affordable Care Act’or Obamacare’moves forward.

For example, New England Fuel Institute has contracted with the national employee benefit consulting firm, gbac, inc., of North Haven, Conn., to launch a private health insurance and employee benefits marketplace for its members in Massachusetts. NEFI Page will offer the program in partnership with the Massachusetts Energy Marketers Association.

“The launch of our private marketplace after the first of the year is important to delivering a tremendous array of health insurance and other employee benefit options to our members’unlike what our members could find anywhere else. In addition, our partner at gbac delivers important compliance and administrative help to our members in the wake of the Affordable Care Act,” said Michael Trunzo, CEO of NEFI in a release.

The Connecticut Energy Marketers Association has similarly contracted with gbac, inc. to find more info for its Health & Employee Benefits Marketplace. The Oilheat Institute of Rhode Island is also moving ahead with a private exchange benefit.

FON interviewed gbac, inc.’s Joseph A. Bucci Jr., CPA, about the private exchange option.

FON: How prepared are industry companies for the changes occurring under the ACA?

Bucci: What we’re finding is that most employers still do not have a good understanding about what the requirements are, and what expectations they should be setting for employees. And more so, they do not really understand the impact to rates that all of the changes under the Affordable Care Act have made to the entire economic process of offering group coverage.

FON: Is that the driver behind the associations becoming more involved with the issue from a member benefits standpoint?

Bucci: There are associations in the Northeast and around the country that are taking an active role in providing their members with a value. What’s perceived at the association executive level, as well as the board decision-makers, is that it really makes sense for them to be engaged in this process. This is not going to go away, and there are many things going on under the ACA in addition to market changes by insurance carriers. They believe that the more information they can give their members the better off they are going to be. And from the carrier side, and certainly from the well-advised broker side, the information that we provide our clients including associations is invaluable at this time.

FON: The public exchanges have been fairly well publicized from the earliest days. A core of the benefit offer with the associations is a private exchange. How do they fit into the ACA picture?

Bucci: Public exchanges, whether federally facilitated or state-based, basically are opportunities for small employers in some cases as well as individuals to go about seeking coverage, as either another option to what they currently have or if they do not have any coverage. There can be support if they need it, through a federal subsidy based upon financial and demographic information. Those plans do have some limitations on benefits, and they also have some limitations on provider network. That tends to be the case when you do a side-by-side comparison to what we call on-exchange plans (state or federally base) and direct plans or small group plans with the carriers.

A private marketplace or exchange is going to have access to more carriers and plans compared to the public because not every carrier participates, and it also can have benefit structures that are much more robust with both benefits and providers in comparison to the public. I think what people have come to understand is that if an employer has a plan it is offering and wants to keep a similar structure, it will likely have more success doing it under a system where you have a benefits advisor, technology attached to it and for all intents and purposes is not really tied to seeking subsidies. That’s typically not a major issue, because in a lot of cases the people seeking those subsidies generally are not in a condition to afford health insurance today either through an employer or individually.

FON: This seems to allows the employer to retain some of the traditional benefit controls they have enjoyed in the past, but at the same time allow the employees more control as well.

Bucci: If the federal government is going to dictate that employers need to treat their employees like healthcare consumers then let’s do so, and in a way that encapsulates all the necessary information from workforce management right through how benefits are offered. Give them access to educational materials and recommendation technology that can help them make decisions on what they can buy and why. Have the financial calculator assistance where they can basically see what is going to come out of their paychecks, and the value of what they are buying, and it gives them more choice.

The best way to think of the association marketplace business is that it’s like a warehouse, and in that warehouse you have a lot of products and the members’ employer groups of the association’can go in to buy and stock their shelves. And the employees have the ability decide whether they want to purchase items from those shelves or not. It takes a lot of the guesswork off of the employer, and it does engage the employee to become a consumer and be accountable for what and how they purchase.

FON: To focus more on the ACA itself, it is not being generously embraced by the public so far, and it is under political attack. Changes seem to come out weekly trying to massage some of the more pending concerns. Will it survive?

Bucci: My perspective is that I don’t think the ACA is going to go away. I believe it’s here to stay for a couple of reasons. I believe there is some good in it, with some of the preventive measures such as an annual physical covering mammograms and colonoscopies as people approach the age where risk factors go up. I believe the ACA also has some provisions in at the try to mimic what the Medicare system does, which is successful in the way it is structured and operates for the retiree community. I think where it falls short is that it was implemented improperly, and there was no true education as to what was being provided and how it was being provided.

I think it was marketed under a bit of a false pretense, only because I don’t think there was a great deal of communications between the insurance carrier market and the government about what they are trying to do. And, I think that because it was a rush to try to get it done while the current administration was in office, it was implemented poorly and put a tremendous amount of strain on what was already a complicated matter’health insurance. And, I think it made it more complicated.

But, I think way too much money has been put in it already for anybody to really repeal it. I do think we will see some amendments and changes to how benefits are offered through the Affordable Care Act, but I don’t believe we are going to see big huge changes that would force the repeal.

I think you might see wider acceptance as hopefully some of the measurement and compliance issues of the affordable care act become more prevalent, and that they are going to bring stability to rates.

FON: With all of the ongoing changes and modifications and deadlines, what should employers be aware of now?

Bucci: Employers, especially the smaller employers, should start implementing defined contribution (see sidebar). What that means to the layperson is that employers need to sit down and prepare a budget of what they can afford to spend, and then figure out how they are going to spend it amongst their workforce. And then let the employees go into the private benefit marketplace and make decisions on what they buy based upon what they can afford, with a combination of the employer’s money and their own money. And I think the beauty behind that is that employers up untill now have really not had the planning process. They’ve kind of reacted to where premium levels have gone year after year, and unfortunately premiums have done nothing but go up in the past 10 years.

Employers need to make the plan for the workforce. Employee benefits is a big profit and loss line item, so why not take the time to properly implement it so that you know what’s going to be spent and how it’s going to be spent. And, let your employees have more to say.

Once people have the decision-making power they are going to make decisions that best suit them, and the decisions will most likely be far from what the employers thought they might want. We’re seeing that already with consumers really thinking about what they are buying from an affordability standpoint, and what other products they could use to supplement themselves such as an accident policy or hospital policy. The whole defined contribution model really instills that. I think what employers really need to start doing is focusing less on what the premiums are and what they can afford, and at the end of the day it’s a win-win because everybody has the same stake in the game.

FON: What trends have you seen from this?

Bucci: A health savings account is one example, and that is typically tied to a “bronze” level plan if you want a comparison to the public sector. We are seeing them put money toward voluntary plans like accident, cancer or critical illness, so if something happens there is some level of reimbursement so they can pay for some of those deductibles that are higher than what they are used to. And, I think at the end of the day the overall surprise to me is that post enrollment most employees are happy that they have a say in what they can buy, and that they are making their own choices and not the employer. That is probably the biggest positive that’s come out of this.

FON: What is the biggest challenge moving these offerings forward?

Bucci: The consistent theme you would probably hear is slow to start. Part of that is new products in a changing market, a lack of education and maybe the employee realizing that he or she needs to engage in personal education. I think the associations are finding that one of the barriers to entry early on is that there is a lot of market confusion. And, I do believe it is also slow to start because everybody is trying to catch their breath, as it’s been a very chaotic three years. In the midst of that you are trying to put forth an opportunity for people look at benefits differently so they do not have to be confused. They have to work their way out of the confusion.

FON: Any final thoughts?

Bucci: It’s important to stress that the association members are going to have an alternative that is not readily available in the market. One of the things that I think is very advantageous with the marketplaces that are opening up is that they are carrier agnostic. There is no special plan, no special rate and no special filing. So what that means is that the employer has the ability to work with their current, broker or with us’whichever they feel more comfortable with’based upon what they are trying to accomplish. And they can do so in an environment where they have access to all of the plans in the marketplace.

That’s not true of every private benefit marketplace or for every private exchange that is offered. We are the only one we believe, from our competitive analysis, that offers that flexibility to employers to stay with the carrier, and in some cases with the plans they are already have.