But health care reform and the regulations of the Affordable Care Act have given employers some new options and even more dramatic decisions to make. Should employers continue providing group health benefits, absorbing annual cost increases and maintaining limited options for employees? Should they abandon group health benefits completely and direct their employees to individual health coverage offered by public insurance exchanges?

Or something in between?
Private insurance exchanges provide an alternative to the public exchanges established by the Affordable Care Act and allow employers to retain their ability to design employee benefit plans that support human resource strategies and cost management goals and offer more choices to employees, according to Assurex Global, the largest privately held commercial insurance brokerage group based in Columbus, Ohio.

In January, Assurex announced a private insurance exchange that promises to provide member agents and brokers and their clients with plan design options, supplemental voluntary benefits and the advantages of Affordable Care Act compliance.

The Assurex organization, which represents about 600 shareholder agents and brokers and $28 billon in premium volume, cites an analysis from Accenture Research that indicates that within the next five years, nearly 20% of employees nationwide are expected to get their health insurance through a private exchange.

Assurex isn’t the first brokerage group to establish its own private exchange. Last year Willis North America in New York, a division of Willis Group Holdings, announced a private exchange for its clients, dubbed “Willis Advantage.” The Willis exchange follows private exchanges established by other large brokerage and benefits consulting companies, including Towers Watson, Aon Hewitt, Arthur J. Gallagher, Inc., and Mercer.

John Clark, employee benefits practice leader at Assurex, says his organization’s private exchange will appeal most directly to the organization membership’s target market, employers with 100 to 1,000 employees, and focus on specific market segments served by Assurex members.

Clark says the exchange will integrate the leading health plans in regions requested by participating Assurex brokers, including BlueCross/BlueShield organizations and United Healthcare, and will offer employers several options that will comply with ACA administrative regulations.

“We say that we are providing a national exchange, but the structure and participation of carriers will vary somewhat by region to meet the needs of our members in their area,” he explains. “Generally the exchange will involve the leading markets in the area served by a participating agent or broker.”

The plan design choices will include:
—Defined benefit or defined contribution health plan designs. Clark says employers have become increasingly interested in defined contribution models for benefits, which allow them to set specific amounts on a per-employee basis and cap their costs on an ongoing basis.
—Standardized packages of medical and voluntary benefits underwritten by participating companies. Employees will be able to spend the employer contribution on a range of benefits packaged by their employer to meet marketplace and human resource goals and provided by groups of participating insurers active in each region.

In addition to health benefits consistent with ACA standards, the exchange can provide life insurance, dental and vision care, short- and long-term disability insurance, and long-term care insurance.

The exchange also will provide support for ACA recordkeeping conducted by a third-party administrator that can generate claims, health and wellness data that are important for cost control strategies.

Because employees will be making more benefit choices and taking more responsibility for health care spending, Clark says, communication and online administration are critical. The exchange also provides decision support and educational tools to help employees understand the various benefit choices and the relative costs.

Clark says many employees may choose health plan options with higher deductibles and Health Savings Account (HSA) features that charge a lower annual premium, making more of the employer contribution available for use in purchasing supplemental coverage.

The exchange also provides strategic benefits to agents and brokers by allowing them to retain employers who want to have better cost control but do not want to subject employees to the plan limitations and community rating standards of the public exchanges.

For administration of the exchange, Assurex has partnered with Businessolver, Inc., in West Des Moines, Iowa, a human resources and administrative services company. The administrator provides Web-based enrollment services as well as human resources support data and compliance management.
Clark says the exchange is being rolled out immediately to about 60 agencies in several states and will be available nationwide this summer. The exchange has about 40 employer applications pending from the first stage of rollout.

A win for agents and employers
Austin Madison, vice president of employee benefits at the Crichton Group in Nashville, Tennessee, puts the program in an employer and agent/broker perspective.

“Health care costs continue to go up for employers, and something has to be done about those rising costs. For many years, employers have offered their employees just a few—one to three—group medical benefit options and have taken the responsibility for managing costs.”

However, the approach hasn’t been effective in controlling costs, or giving employees a sense of choice and involvement in their consumption of health care, he explains.

The private exchange, which is already being promoted on the agency Web site, allows employers to offer a wide range of benefits that are competitive with those provided by other employers in the region, including health plans from the region’s largest carriers, BlueCross/BlueShield of Tennessee and United Healthcare, and vision, dental and voluntary supplemental benefits from leading insurers in the market.

The defined contribution model allows employers to cap their costs, support wellness and health management goals, and shift cost control to the plans’ end users, employees, Madison says. “Employers can specify their annual contribution to benefits, building in an annual cost of living increase in the contribution, and have a stable, predictable benefits budget, not subject to annual claims-based premium increases.”

The Crichton Group has several employers enrolled in exchange programs for March and April 2014 renewals, he says.

Ken Olson, division president of The Horton Group in Chicago and Orland Park, Illinois, expects its first employer participation in March and has already designed “benefit bundles” that meet client expectations and are underwritten by large carriers for the region, including BlueCross/BlueShield of Illinois and United Healthcare.

The agency also has designed a benefits package for employers that are used to self-funding a portion of their traditional defined benefit health insurance program.

Olson says the option allows employers to maintain the financial advantages of improved claims experience while offering contemporary benefits choices.

The author
Len Strazewski has been covering employee benefits issues for more than 30 years. He has an M.S. in Industrial Relations from Loyola University in Chicago.