ACA & The New Normal

What factors should you consider when advising clients on a private exchange?

by Karen White

Ms. White, Assistant Vice President, Health Care & Exchange Solutions, at Sun Life Financial offers perspectives on market responses to the Affordable Care Act from the viewpoint of a group employee benefits carrier. Karen can be reached at

Is it worth making the move to a private exchange? That is the question many employers are asking themselves.

According to a recent report from PricewaterhouseCoopers, 44% of employers are currently considering moving their benefits offerings to a private exchange.1 Are your clients among that group?

What your clients may not know is that private exchanges have been operating for decades; they are now in the spotlight because they have become a major part of health care discussions. With the Affordable Care Act (ACA), private exchanges (also referred to as marketplaces) have re-emerged as an innovative tool to offset rising health care costs, reduce administration burdens, and enhance employees’ satisfaction with benefits. Although private exchanges are becoming more popular, their structures and nuances can still be somewhat of a mystery for employers.

The decision to move to a private exchange is not an easy one; it is rife with technology, employee communications, and budget considerations – to name a few. And just as each business is unique – with different cost thresholds, benefits philosophies, and employee demographics – so is each private exchange. With all the different solutions out there, how can you help your clients choose the best one to fit their needs? You can help them navigate the private exchange landscape by taking them through the following questions.

What products should you offer on the private exchange?

Before you start evaluating options together, ensure your client determines the type of benefits package they want to offer their employees. Once they determine the type and range of products to offer, you should review:

  • Does the exchange have relationships with medical and ancillary (or voluntary) carriers or does it operate only as a technology platform?
  • Does the exchange limit the number of plan configuration variations or does it have an open architecture?
  • Does the exchange support underwriting, portability, and conversion capabilities? If yes, are there any limitations?

What’s the employee experience on the private exchange?
The decision to move to a private exchange is not an easy one; it is rife with technology, employee communications, and budget considerations – to name a few

As a consumer’s online experience continues to evolve, it’s critical to evaluate the employee interface of each private exchange to make sure it is intuitive and easy to navigate. In many cases, the private exchange replaces the traditional enrollment process, and the employee becomes responsible for educating themselves and making these critical decisions on their own. Since electing benefits is typically a once-a-year transaction, the interface should accommodate different learning styles, and the content should offer the right level of information employees need to make informed decisions.
Does the exchange provide any decision support?

In the “new normal” of health care reform, employees are faced with an increased responsibility for choosing their benefits and will need guidance beyond basic benefits education. Many exchanges apply behavioral economics analysis to understand how individuals make choices so they can offer just the right number of product options without overwhelming employees. In addition, private exchanges offer different approaches to decision-support tools: approaches range from personalized recommendations based on the employee’s personal information to default product recommendations based on demographic information to strategic product placement during the enrollment process.

When evaluating the decision-support tools an exchange offers, you should review:

  •  How does the exchange gather individual information and preferences from employees?
  • To what extent is that information used to create meaningful, customized recommendations for each employee?
  • What best practices are followed to define the number of questions asked, and the order and placement of those questions?

Decision-support tools can set private exchanges apart from traditional benefits administration platforms; and it’s often a private exchange’s recommendation framework that can be its strongest differentiator.

Will the exchange reduce your administrative work?

Just as important as the employee experience on the exchange is the employer’s experience with the back-end administration. It’s important to understand just how well – and how much – an exchange can reduce the amount of benefits administration (e.g., new hires, life events, ACA compliance). You will want to review:

  • How does it support functions such as billing, member maintenance, and reporting?
  • How robust are the electronic data interfaces with carriers?
  • How does it help manage ACA compliance?

A private exchange may have solid user interface capabilities, but the importance of the back office support cannot – and should not – be underestimated.

How much will this cost?

Cost predictability is a strong determinant when looking to move to a private exchange, so understanding a private exchange’s specific fee structure is important. Some have implementation fees, some have per-employee per-month fees, and some have flat fees per module. Each private exchange’s fees will vary, but they are negotiable. You should help your client evaluate the fees holistically to ensure that the cost of the exchange solution aligns with expectations – and their budget.

Not all exchanges are created equal. Ultimately, the adoption of a private exchange is dependent on its ability to deliver value to the employer and their employees. You can help your clients assess each exchange contender across the spectrum of product offerings, employee experience, decision support, administration, and cost. The decision to move to a private exchange can be a difficult one, but by taking your clients through the right questions, finding the right one doesn’t have to be.



End Notes
1. PricewaterhouseCoopers: 2015 Health and Well-being Touchstone Survey.

One response to “ACA & The New Normal”

  1. Maggie Powers says:

    Thanks for this useful article. Very pragmatic questions about private exchanges, which makes it less daunting to think about switching to one. I will definitely be sharing this!