5 Factors Influencing Private Exchange Adoption in 2016
If you’ve been following our blog, you know that last year I wrote about “3 Reasons Why 2014 Was a Pivotal Year for Private Exchanges.” So here we are again, and the truth is, every year is a pivotal year for private exchanges. Because as we and others in the market work to expand our merchandise and improve our technology, private exchanges will continue to be instrumental in the evolution of employee benefits strategy.
So where is the tidal wave?
Historically, we’ve seen that companies take a long time to make big decisions, especially when the decisions require a significant transformation in processes. The shift to 401(k) plans didn’t happen overnight, it just seems that way in retrospect because the usage is so widespread now. We predict the same thing will happen for private exchanges once employers come to fully understand their advantages. Adoption rates today make sense. The excitement around exchanges is what drove the predictions we’ve seen over the past year or two, along with the fact that employers say they are “interested.” 2016 will be about moving the needle from interest to adoption and there are several things going on in the industry that will contribute to this:
- Increased Carrier Participation
Carriers now see private exchanges as an essential part of their distribution strategy. As benefits consumers come to take a more active role in making these important decisions, they will be looking more closely at carrier offerings and evaluating them with a more critical eye than ever before. We were pleased to recently welcome Aflac, a leading provider of supplemental medical insurance, as a partner to our exchanges. Aflac has told us that, “Bright Choices will help grow and expand our distribution model with brokers and, ultimately, drive broker sales,” while providing “added value to our customers who will have more information available to make more educated decisions regarding their benefits needs.”
Earlier in 2015, we welcomed Unum, the leader in group and individual disability insurance. Similarly, Unum partnered with us, “because of our like-minded approach to provide quality products with exceptional guidance and support.”
As more carriers realize the need to be part of the exchange revolution, employers will have no choice but to take notice as well.
- The Effect of Public Exchanges
The news about public exchanges has been both helpful and a detriment to private exchanges. It’s been good for putting the conversation about health insurance and the idea of shopping for it front and center; no one can afford to ignore it anymore. But with all the rollout problems and mixed messages in the press casting doubt over their effectiveness, not to mention the potential of a heated presidential election threatening to alter or even repeal the ACA, employers will need more education as to why private exchanges shouldn’t be judged on the success or failure of public exchanges.
- The Rise of Non-traditional Insurance Products
Last January, Forbes magazine predicted that telemedicine may just be the biggest digital health trend of 2015, citing that, “Consumers are excited about the service and providers finally have both the financial incentive and technological capability to make it a reality.” And with SHRM reporting that more than two-thirds of U.S. employers offer wellness programs as a means of increasing prevention to decrease health care costs, benefits are about way more than traditional insurance products.
Private exchanges support these different products and programs along with offering services for legal protection and health coaching, insurance for your pet, and other non-traditional products that are continuing to gain steam in the market. Employers will be looking for a one-stop shop for many of these types of products so they don’t have to go out and negotiate with a different carrier or vendor for each new product they may want to consider.
- When it Comes to Jobs, it’s an Employee’s Market
With the unemployment rate dipping below 5 percent for the first time since 2008, the race for talent is overwhelmingly favoring the employee, leading the Daily News to declare: “America has a talent crunch. The demand for talent exceeds the number of available job seekers.” What does this mean for employers? It means that finding new ways to attract and retain employees is no longer something on an HR person’s to do list, it’s become a corporate imperative.
When we first started Liazon in 2008, we understood that the reason employers offered benefits was simple: to attract and retain employees. That phrase again. We haven’t waivered from this position in eight years, and now as we look ahead to 2016, we’ll see more employers looking to private exchanges as they find it harder to recruit top talent. Private exchanges will help them to do this by increasing their employees’ satisfaction with their benefits.
Liazon’s survey of employees using our exchanges to choose benefits found that a full 96% of employees reported overall satisfaction with their exchange experience, and 95% were satisfied with the benefits they purchased last year. And studies show that employees who are very satisfied with their benefits are almost four times more likely to be very satisfied with their jobs.
- Data is King
Our most recent survey results for 2015 found that employers’ perceptions of how their employees view their exchange experience, compared to what their employees actually expressed, were off. According to our survey, 96% of employees reported satisfaction with the exchange, but only 77% of employers believe their employees are satisfied with it.
Corroborating the discrepancy between employer and employee perceptions, SHRM reported on a National Business Group on Health (NBGH) survey conducted in July and August 2013, at which time more than half of the 1,520 employees surveyed said they would be interested in purchasing their benefits through a private exchange. That’s as of two years ago, it’s probably higher now. Yet the most recent surveys place employer interest in private exchanges far below 50%. Again, this points to the need for better education for employers as to how their employees feel and what they want in terms of their benefits.
That’s what we’ll be working to address in 2016.
For more on the results of our latest Employer/Employee survey on how exchange users feel about their experience, see this article in Benefits Pro, “Employees Overwhelmingly Want to Choose Their Own Benefits.”
 MetLife, 13th Annual U.S. Employee Benefits Trend Study, 2015, “Getting to Greater Loyalty and Satisfaction”