What is "the profile" of an employer that offers a private exchange?

By Michael Thompson (PwC)

Defining the profile of a “private exchange employer” seems like a straight forward question but the answer is not so straight forward.  When PEEC looked at interest in the considering private exchanges http://www.thepeec.com/, we found broad interest across industry, geography and size of company.   The following values stand out in companies that are seriously considering private exchanges for their employees over the next few years:

  • Focus on Choice – The clearest distinction in a private exchange is the ability to offer a myriad of plans and networks as well as ancillary products.  For some employers, buying into a storefront can simplify the offering of choice and enable a dynamic market place that can satisfy the needs and values of a diverse employee population.
  • Focus on Consumer Experience – Private exchanges can offer a unique consumer experience, initially during enrollment and then ultimately in supporting employees and their families to manage their health and healthcare needs.  Many of the consumer programs and tools that employers and health plans incorporate into their strategies can be utilized across plans in a private exchange.
  • Focus on Defined Contribution – While a private exchange is not necessarily tied to a Defined Contribution strategy, it can help an employer implement defined contribution based strategies. Early experience is showing that consumers that are given a pool of money will tend to spend the money more prudently consistent with their needs and values.
  • Focus on Delivery System Value – Some employers may find that a private exchange can help them accelerate their strategy to offer more value based choices.  For example, private exchanges can help to accelerate delivery-based strategies related to centers of excellence, accountable care organizations and “best in location”.
  • Focus on Stewardship – Some employers may be looking to delegate management of their programs to a steward that incorporates a “best practice model” based on a specific point of view.  Much like an investment manager for the 401(k), the private exchange becomes the steward to manage this portfolio of health and welfare offerings over time.

Although these values are not unique to employers considering private exchanges,  some employers may see private exchanges as a way to accelerate their company’s health strategy.  If they do move to a private exchange, they should 1) “lock in” the gains they are already achieving in their current health strategy, 2) evaluate a diverse private exchange marketplace with a clear understanding of what their values and priorities are, 3) ensure there is clear transparency and value associated with the financing of the private exchange and 4) understand that their oversight responsibilities as plan fiduciary do not go away with moving to a private exchange.   Why else would you move to a private exchange?