Look! Up in the Sky! Is that a Private Exchange or a Flex Plan?!?

I recently returned from the HR Technology Conference in Chicago and found that one of the unofficial themes that emerged by walking through the exposition hall and talking with various providers and thought leaders was the concept of a private exchange. Every benefits administration company was flying the private exchange flag and were promoting how well-positioned they are to lead the industry in private exchanges. However, upon further examination, there seems to be an over-use of the term in an effort to capitalize on the publicity that has been created in and around exchanges. By definition, a private exchange is an aggregation of health plans that are made available to a specific organization(s) and are run by a private sector company or nonprofit. The health plans and carriers in a private exchange must meet certain criteria as defined by the exchange management and combine technology and human advocacy, include online eligibility verification, and provide mechanisms for allowing employers to offer subsidies to cover the costs of insurance. The technology must also make available decision support tools to help consumers find plans personalized to their specific health conditions, preferred doctor/hospital networks, and budget. There are many organizations in the market today that have keyed in on certain aspects of the above definition, but are leaving out critical aspects. Based on our market research, there are many organizations that are promoting their private exchange as an on-line enrollment solution with eligibility management and a subsidy approach that allows an employer to provide an employee with a set dollar amount to purchase their healthcare. Wait. Does this sound familiar to anyone else? If you take a step back and re-read the previous paragraph, you will be taken back to a time gone by where Flex Plans and Flex Credits ruled the day. Flex Plans had their heyday in the 90s and into the early 2000s and had a great run. They were pervasive — showing up in Fortune 500 companies all the way down to the companies in the small- to mid-sized market space. Don’t get me wrong, I’m not banging on Flex Plans. I believe their shelf-life is strong and could successfully be utilized by organizations today. The point of this post is to ensure that employers don’t get duped into thinking that a funding arrangement such as a Flex Plan, offered with slick technology, is a Private Exchange. It is not. While there are key similarities from a funding and technology standpoint, there are several key differentiators that must be considered. In a true Private Exchange, it is the manager of the exchange that is responsible for gathering the carriers together and determining the plans to offer within the exchange. They pull together all the various plan designs, plan types, and, along with the carrier, set the rates. The exchange is also responsible for enrolling the employees, providing employees with decision support tools to guide them through the plan shopping experience, and to administer the plan, post-enrollment. By entering a private exchange, the employer’s responsibilities are significantly reduced — picking among the available exchange options and setting the subsidy levels. Under the Flex Credit model (even if it is labeled as a private exchange), the employer is still responsible, with the help of their trusted advisor/agent, to select the plans, pick the plan designs, administer the plans, etc. Therefore, while there is certainly shared DNA between Flex Plans and Private Exchanges, they are different and it is incumbent upon those of us within the industry to ensure our clients are clear on the differentiation and not be over-sold on the concept of a private exchange. Because, based on my experience at the HR Tech Conference, the sharks are circling in the water and are ready to over-sell “private exchange” capabilities.

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