Rhonda Marcucci, founder of Gruppo Marcucci (GPM), is a respected industry, observer, speaker and author of articles on topics pertaining to the HR and Benefits Administration technology and outsourcing industry. For up-to-the-minute insights from industry conferences, follow Rhonda on Twitter.
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Cost and Consumerism Continue to Drive Industry
Posted on 11/28/2014
You say tomato, I say tomato… That pretty much sums things up when it comes to the defining the difference between private exchanges and benefits administration. This was reinforced at the IHCC Forum (Institute for Healthcare Consumerism) and AIS Healthwebinar on Private Exchanges for insurance carriers, where there was lots of evidence of Private Exchanges morphing into BenAdmin, and BenAdmin morphing into Private Exchanges. Following are key insights from these events from the Gruppo Marcucci team.
What’s the difference between a private exchange and benefit administration? A frequently asked question…the lines between the two continue to blur. The latest distinction made by service providers is private exchanges are more than just plan selection (think tools to help employees use their benefits). With many of the same pool of providers serving both product categories, end products are not so different. That said, we believe exchanges’ pre-packaged products and plan designs are their key differentiator. The challenge for this model: Brokers are not used to selling standardized plan designs and employers are not used to buying them. Before long we’ll stop asking the question because in the big picture… does it really matter so long as employers/employee needs are being met?
Consumerism vs. coercion. Employers are embracing wellness programs to keep healthy employees healthy, and to help unhealthy employees get healthier, all which helps control costs. Introduced under the consumerism umbrella, employers are inching from using the carrot (incentives) to the stick (we’re paying so you have to participate). Employers need to strike a balance between costs and employee satisfaction. Push too hard and employees will push back. We’re not there yet, but something to watch.
Employer engagement. Employers are increasingly moving into two camps: 1) Those who feel a need to be engaged with their employee’s health; and 2) Those who provide financial support, but are unengaged in the details, leaving choices and outcomes to their employees. There is a lot of product customization in both camps. Watch for the “unengaged” camp to become more standardized over time. The need for high customization will continue within the “engaged” camp with increased innovations.
First out of the box. With the introduction of private exchanges and other recent marketplace innovations, many employers are opting not to be first on the bandwagon. The fear: “What if it harms my employees, or ability to recruit/retain?” These fears appear to be unfounded. Employer innovators are reporting no downside to being the first out of the box.
From the Carrier perspective… There’s plenty of value for carriers in the private exchange model, including access to more data, but carriers report collective concerns, including:
Expanded plan varieties/levels are harder to price, as employees choose plans that fit their risk (the healthy aren’t subsidizing the sick). Sophisticated underwriting and/or risk adjustment is needed.
Commodization of health plans leads to price-based competition.
Loss of B2B relationships with employers who identify with the exchange; impacting prospects for ancillary and other business.
Loss of B2C relationships with employees who identify with the exchange; impacting brand recognition.
Trending: validation and certification. Consumerism is one driver behind the growing interest in validation. One entry in this space is the Validation Institute, (showcased at IHCC), from Intel and GE Care Innovations™. The service offers to validate claims made by service providers e.g., does a product really improve employee health…or save the company money? Expect more of these services to come on to the market. We’ll be watching closely as the industry will benefit from good evaluation tools.
“We’re in the most significant time of change in employee benefits that you’re likely to see,” said Les McPhearson of UBA at the IHCC Forum. The Gruppo Marcucci team agrees. Costs and consumerism will continue to drive this industry, but the degree of disruption and innovation currently underway is the most we’ll see for the foreseeable future.
If you want to chat about any of these consumerism insights, or need assistance with identifying and assessing service providers in the market, email Rhonda@gruppomarcucci-usa.com.
Gruppo Marcucci (GPM), a division of Gallagher Benefit Services, Inc., provides outsourcing intelligence and associated consulting to stakeholders in the Benefits and HR Technology & Outsourcing industry. Our in-depth understanding of the service provider market and our vast experience sourcing and implementing solutions is key to our clients achieving full operational success.
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