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Private Exchanges: Frequently Asked Questions

Private Exchanges: Frequently Asked Questions

Interested in learning more about private benefit exchanges? We’ve compiled these FAQs to help explain how they work. If you think a private exchange (a.k.a. benefit marketplace, group marketplace or individual marketplace) might be right for your business, contact your Willis Towers Watson representative or email us at benefits.solutions@willistowerswatson.com.

How has the private exchange market evolved?

Private benefit exchanges came on the scene more than a decade ago as a new way to deliver cost-effective health benefits to retirees. The first private exchanges were used by employers to make it easier for their Medicare-eligible retirees to transition from group health plans to the individual market for private Medicare plans.

Private exchanges for group health plans soon began to catch on with employers interested in serving their active employees, as they emphasized choice in medical plans and other benefits, decision support to offer guidance to employees in choosing benefits, and cost control for employers. Some required employers to move from their self-insured models in favor of a fully insured approach, and release their relationships with carriers in favor of selecting among predetermined plans offered in the benefit exchanges.

Some larger employers found these components too restrictive. At the same time, however, many small and mid-market employers were drawn to private benefit exchanges because they appreciated their ability to offer choice, a consumer-like shopping experience and predictability of their annual benefit budget.

Within the past 10 years, private exchanges evolved to provide more flexibility for employers of all sizes and levels of complexity. For larger employers, private exchanges now offer more flexibility, and allow them to design benefit programs that are in line with their employee value proposition and Total Rewards strategies. At the same time, their employees receive all of the benefits of a marketplace-based, consumer-centric delivery model.

What are the advantages of private exchanges?

With private exchanges, employers can:

1. Provide employees with expanded choice in plan designs and benefit types, giving them the opportunity to build more personalized benefit portfolios that better meet their individual, generational or life stage needs (for example, millennials versus baby boomers, parents with young children versus empty nesters, and so on)

2. Deliver a more satisfying benefit experience to employees through a compelling consumer-like shopping experience, decision support tools and price transparency

3. Simplify day-to-day management, reporting and compliance of benefit programs, which can become more complex once employers start offering more choice and personalization

4. Accelerate the introduction of new benefit programs by selecting from a number of pre-configured options in such areas as medical and voluntary benefits, and wellness and well-being programs, and such nonmedical products as identity theft protection — or by designing their own customized offerings

5. Better manage costs by offering plan choices that meet the unique needs of employees and their families, allowing employees to “right-size” their benefit plans by picking only the products they need. This may lead some employees to bundle offerings together (such as a high-deductible health plan with a health savings account, along with a voluntary benefit option, such as critical illness or accident insurance)

How do private exchanges help employers deliver a more satisfying benefit experience?

Private exchanges provide employees with expanded choice, a more consumer-like shopping experience and the chance to build personalized benefit portfolios that better meet their unique needs. In fact, in our own surveys of employees who choose their benefits through Willis Towers Watson private exchanges, just 4% prefer to have their employers choose their benefits for them, in contrast to making these important decisions for themselves. Our surveys also show a 94% satisfaction rate with the private exchange enrollment experience, and that 83% of employees understand their benefits as well as or better than they did prior to using the exchange.

This, along with a better understanding of how much their benefits cost (many private exchanges incorporate a defined contribution mechanism that allows employees to see how much their employer is contributing to their benefits as well as how much their own share of the cost is) leads employees to value their employer’s contribution to their benefits more than in traditional benefit arrangements.

Some employers are concerned that employees using private exchanges will make poor choices. Is that a valid concern?

In our experience, the opposite is true. The most effective private exchanges provide employees with more choice but also include well-designed decision support, comparison tools and customer support — which give employees the guidance they need to choose their benefits wisely. Employees not only enjoy the experience but also are happy with their choices after using them. In fact, Willis Towers Watson research found that 92% of employees who used our private exchanges were satisfied with their benefit selections one year later.

What is the future of private exchanges?

We believe the future of private exchanges is bright. Initial employer concerns regarding their lack of flexibility, or the ability for employees to choose wisely from a broader set of benefit options, have now been dispelled based on real-world data. Also, discussions concerning the public exchanges have brought the term into the public consciousness and made people more aware of the concept of shopping for health and other benefits online.

We encourage employers who are considering modernizing their benefit program through a private exchange solution to talk to a Willis Towers Watson representative to learn about their specific goals and challenges. Together, we can determine how to best meet your benefit goals.

Willis Towers Watson believes that the sharp lines that the market once drew between different benefit delivery approaches is best understood as one model, with different solutions positioned along a continuum. The decision between traditional benefits outsourcing or an exchange solution will largely depend on each employer’s particular situation, goals and employee base.

For those employers with a desire to modernize their benefit delivery by offering expanded choice, increased decision support and price transparency, we have a fully integrated, end-to-end solution that’s backed by 10 years of exchange technology experience and over 100 years of benefit consulting experience to help you identify the right solution for your benefit needs.

Regardless of where employers fall on the continuum, they’ll be seeking a partner who can meet their needs and meet them where they are. Willis Towers Watson is poised to do just that.

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CONTACT US

Learn more about Willis Towers Watson’s private exchanges and other benefit solutions today. Contact your Willis Towers Watson representative or email us at benefits.solutions@willistowerswatson.com.

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Frequently Asked Questions