Is confusion to blame for slow private exchange adoption?
Private exchanges could help lower employers’ benefit costs and increase their employees’ options while keeping them more engaged, proponents say. But growth in the private exchange market, though steady, has been slow.
A recent survey from Liazon, a private benefit exchange provider, may explain why: Many employers do not understand what exactly they are and what they can gain from them.
Nearly half of respondents stated that they would switch to a private exchange if it could help control their benefit costs without compromising the quality of plans offered to employees. That’s about the same amount of respondents who were either not very familiar or not familiar at all with the private exchange model.
A little more than a quarter of respondents did not believe that a private exchange would help control costs, and 30% did not want to adopt the system because they like having control over their benefit plan design.
Cutting through the jargon
“I think, in the benefits world, there is a lot of jargon,” says Alan Cohen, chief strategy officer and co-founder of Liazon. “You give your employees money and let them shop for the things that matter the most to them. Shopping for group insurance plans is the same as before, but with more choice and control for employees.”
It’s the role of brokers and advisers to break this jargon down for employers so that all of their options are not just known, but understood. If employers don’t understand all of their available options, they also may not see the real pros and cons of adopting new systems, such as a private exchange— especially when, according to some, the cons of private exchanges are almost nonexistent.
“I really don’t see any negative consequences,” says Joe Donlan, the senior vice president and segment leader of broker business for Connecture. “If you’re creating a marketplace that addresses specific needs of an employer, then you’re helping to solve their problems.”
There are also more positive outcomes of adopting a private exchange than just saving costs. Employers may also see higher rates of employee engagement and satisfaction. When employees feel that they have more control to decide what benefits are right for their physical, mental, financial and other wellness needs, it can be empowering and lead to higher retention rates.
“The value proposition is often very compelling,” says Barbara Gniewek, principal at PricewaterhouseCoopers. “It can be a benefit administration program, an enrollment shopping employee engagement program, and it also helps people use healthcare as they need to throughout the year.”