Traditional Benefit Offering, Private Exchange, or Hybrid Strategy: Which is Right for Your Workforce?

Traditional Benefit Offering, Private Exchange, or Hybrid Strategy: Which is Right for Your Workforce?

Today HR can utilize a traditional benefits administration offering, marketplace or private exchange, or – with the support of a modern technology platform – implement both simultaneously to execute a hybrid strategy. But each organization faces unique challenges, meaning no strategy is a one-size-fits-all. To determine the right fit, employers must carefully consider strategic and technological options alongside their current and future needs – and also determine their employees’ needs as benefit consumers.

Your benefits strategy is likely to shift and evolve over time, so it’s imperative that your solution is agile enough to keep up. To do this, the benefits administration platform powering your approach should utilize modern technology and be strategy-agnostic – meaning it can manage your benefits regardless of the type of strategy or carriers you choose to employ. A strategy-agnostic platform will provide the flexibility to evolve and improve your benefits offering over time, with fewer technology modification costs and hassles than on an outdated, inflexible, or hard-to-scale system.

Two of the most common strategies utilized by employers are the defined-benefit model and the defined-contribution model:

Defined-Benefit Model | Traditional Benefits Administration
Traditional employer-sponsored benefits. Employees choose from a limited number of plans, usually three or less, and their employer pays a part of premium. An employer’s benefits spending will vary depending on the plans their employees select.

Defined-Contribution Model | Marketplace or Exchange
A consumer-centric approach to employer benefits, often involving a private exchange. Employers designate a limited amount to contribute per family. Employees then choose from around four or more plans, and pay the remaining cost of coverage after their employer’s contribution.

However, for some employers, a hybrid strategy is the smartest fit for their organization. This new strategic approach leverages modern technology to simultaneously employ both a defined-benefit and defined-contribution model to meet the needs of different employee populations

Hybrid Strategy | The Best of Both Models
In a hybrid approach, an employer will offer benefits to active employees following a traditional defined-benefits model. At the same time, benefits are offered to retirees through an exchange, following a defined-contribution model. A hybrid-strategy enables employers to provide the competitive benefits and coverage active employees are seeking, while also granting a means to better predict and manage costs through retiree benefit programs.

To be effective, however, a hybrid-strategy solution requires the right level of technological support. Not all benefits administration platforms can deliver a streamlined hybrid-strategy experience.

Legacy systems typically run on outdated and convoluted programming that cannot be sufficiently altered to manage a traditional benefits offering and exchange at the same time. Instead, employers are forced to use separate systems for each offering. Each system requires independent implementations, change fees, and data management processes – which can lead to confusion, poor data aggregation, higher costs, errors, and a slew of other headaches.

We invite you to download Empyrean’s newest At-a-Glance Guide for a closer look at the trends and factors affecting consumer-driven benefit strategies. This free guide will help you determine the approach that will best fit your workforce and business now and in the future.

As you read, we’d love to get your thoughts. Feel free to contact us with questions or comments at