Towers Watson acquired Liazon Corporation, a leader in developing and delivering private benefit exchanges for active employees, last week. Representatives of the consultancy believe that this acquisition, which follows the purchase of Extend Health in June 2012, has solidified their position as the leading player in the private exchange market through its OneExchange solution.
"We want to be the leading player in private exchanges, says Bryce Williams, managing director of exchange solutions at Towers Watson. A year and a half ago, they bought the leading retiree exchange in ExtendHealth. Today, theyre buying the leading active exchange technology company, Liazon," adds Williams, also the CEO of Extend Health.
Going forward, Williams explains, this merger will offer three main advantages to Liazon and TW clients. First, Towers Watson expands their scope and reach with the acquisition. While TW had catered toward Fortune 1000 companies with jumbo accounts on their private exchange, now they will have product opportunities available for clients in the mid-market and smaller market. We will be able to deliver their platform and solution for companies as small as 50 and as big as 500,000, says Williams.
Second, clients can now choose to be self-insured (as the TW platform allows) or to be fully-insured since Liazon technology brings both capabilities on one platform.
The acquisition gives Towers Watson the ability to hit the market very quickly with all the most sophisticated exchange technology out there, says Williams. He explains that many private exchange competitors have taken legacy administration systems and tweaked them to label as private exchanges now permitted for active plans under the Affordable Care Act.
TW has a significant advantage since Liazon is one of two standalone companies that solely focuses on building private exchange platforms. The other is ExtendHealth in the retirement health exchange space. Both platforms were developed for the purpose of an exchange and offer TW the ability to increase carrier options. For example, ExtendHealth began with six carriers and now offers 105; Liazons partnership is expected to expand that roster of carriers even farther.
Were bringing additional capabilities and greater connectivity, more carrier choice, online toolsa whole panoply of advancements that Liazon has been working on for six years, were now going to be able to roll out to our clients in one fell-swoop, Williams says.
Liazon currently employs 120 full-time employees. TW expects to grow this division as they have with ExtendHealth, which employed approximately 500 employees and now has 2,000 employees. Liazon co-founder and CEO, Ashok Subramanian, will join the leadership team of Towers Watsons Exchange Solutions segment. Bryce Williams will continue to lead the overall segment.
We see [this acquisition] as like the Optum division inside United; the exchanges solution is going to be an Optum-like division inside Towers Watson focused on delivering world class technology and platforms," Williams says, adding, We plan to follow the same playbook with Liazon as we did with ExtendHealth. We intend to invest, not reduce."
Liazons online benefit marketplaces are currently distributed through over 400 insurance brokers, including nine of the top 10 national firms, under either the Bright Choices brand or as a third-party proprietary exchange. Towers Watson plans to continue these relationships based upon their current terms and use the Liazon name in the market with its broker partners.
Were going to invest in those platforms to add more carrier choice and more value so those mid-market brokers can deliver value to their clients and not have to spend millions or tens of millions of dollars trying to concoct an exchange. This whole market-space is moving very rapidly and they can immediately have the best in class performance backed by accompany with an $8 billion market cap," Williams explains.
Over time, brokers can expect better tools, better connections, and better reporting capabilities. Liazon brokers can now take advantage of TWs transparency tool, BenefitView, which allows brokers to follow their clients enrollments. The merged platform will also have the ability to enhance the voluntary benefit platform dramatically for these brokers, such as access to dental and vision benefits tools.
The platform also allows for tremendous calculator tools that actually link to providers and physicians and networks. And since both platforms were built on advanced Microsoft synergy technology, Williams says, We have by far and away the best technology.
The purchase price for Liazon is $215 million, with the acquisition anticipated to be dilutive to adjusted EPS by approximately $0.10 to $0.15 in fiscal year 2014. There is no impact to the forecasted EBITDA margins.
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