Key issues when considering a private exchange strategy
By Rich Wolfe, CEO Empyrean Benefit Solutions
As the market for private exchanges in delivering health and welfare benefits has grown over the past few years, more employers than ever are considering if they should implement their own private exchange. If you’re one of those employers, I want to share some thoughts that hopefully will help you in your evaluation.
At Empyrean, we have found that very few employers are actually replacing their entire benefits program and moving all of their employees to a private exchange. Companies that do move all employees to an exchange are typically small organizations managing limited complexity. For smaller organizations a private exchange may offer greater choice for less cost and improve overall administration capabilities. Mid-size and large employers often face hurdles such as a highly decentralized workforce, diverse workforce demographics and multiple systems and processes that need to be managed to support strategies focused on talent acquisition and retention.
Many of the private exchange solutions available today require employers to leave behind their legacy programs and force selection from the programs available in the exchange. Additionally, the technology capabilities offered by exchanges frequently provide limited integration capabilities supporting administration efficiency with existing employer systems and processes. These factors may be easy for a small employer to manage, but likely more challenging for a mid-size or large employer.
So it’s not surprising that we are seeing employers looking for solutions that offer the opportunity for a “hybrid” approach to implementing private exchanges whereby the employers turn to the private exchange model only for specific employee populations or certain types of benefits. This type of approach allows employers to tailor programs designed to meet their organizations’ specific objectives. Additionally, we are seeing employers increasingly seek adaptive technology that will allow access to exchange solutions today or over time and not require significant investments such as a re-implementation of their administration system.
Adaptive technology offers a flexible, cost-effective approach for a hybrid exchange strategy
Unlike the legacy outsource providers, more innovative or adaptive benefits administration technologies give employers the ability to integrate exchange products alongside traditional programs from a single platform. That means employers don’t have to decide between an exchange solution or a traditional solution; they can support a hybrid model. Adaptive technologies also support the administration not being tied to the product (benefits, plans, providers) giving employers greater flexibility in managing the program strategy and design as well as supporting long-term administration efficiencies. Without an adaptive technology platform employers will be faced with expensive re-implementations and fragmented and inefficient administration processes as they adjust their strategies.
There are several capabilities that employers should look for when considering a private exchange through an outsourced benefits administration provider.
- Does the provider offer a unified technology platform to serve the current and future needs of employers, HR and Benefits staff along with employees?
- Is the provider’s online user interface intuitive and employee/consumer-friendly so that it will enhance decision-making and minimize call center assistance?
- Does the provider ensure an easy to manage back end system for HR and Benefits managers to save staff time and allow them to concentrate on other HR priorities?
- Is the provider capable of managing multiple plans, and more complex benefits needs efficiently and effectively without expensive customization or fees?
Before you take the leap into private exchanges, it’s important to pull back the curtain and make sure that you examine carefully the advantages—and limits—of any private exchange strategy. Empyrean makes it easier with a new “At-a-Glance Guide” highlighting key issues posed by Private Exchanges. You can download it free from our website at https://www.goempyrean.com/benefits-administration/private-exchange-guide/