Home > Employee Benefits > Private exchanges and the Kardashians

Private exchanges and the Kardashians

opEd-hikesWhen I think about new health care private exchanges, I think of the Kardashians.  Let me explain…

Last week I attended a national health care conference along with 150 of the country’s top brokers and consultants. It was quickly evident that the hottest topic throughout the conference was private exchanges. The exchange expert who spoke drew a more rousing ovation than the Huckabee Daschle PPACA debate segment. Most every consultant there had built one, bought one, partnered with one or was losing sleep over not having one. This is clearly the future of healthcare delivery. Even the hosting carrier was “all in” on investing in the new enrollment platform. I was clearly missing something.

So I decided to investigate one-on-one. I spoke with dozens of peers throughout the conference on the success, value proposition, and differentiation strategy on their specific exchange platform. Aside from a few national consultants who had rolled it out to Fortune 100 clients with mixed success, no one had sold one. Even stranger, no one could tell me why they were so popular, why they were the future of health care delivery of why they would save money. Our firm has been providing clients with a capped defined contribution option for over a decade, think cafeteria plans.

The Kardashains did sneak up on me. I was not paying attention. I don’t even today, know why they are famous. I don’t know where they came from, got their funding, or who put them on television. I see them on magazine covers, in the news, and once a good friend even dragged me in to Dash, an upscale New York Kardashian store. Coincidentally that friend, who is also CEO of a large Midwestern brokerage, is also deep in to exploring Private Exchange models for his brokerage firm, but can’t explain why I need to be “all in” on either Exchanges or the First Family of reality television.

Later in the week, I spoke at an investor’s conference on health care. The questions came early and often. They wanted to know about Private Exchanges and I was ready. I laid out the typical program of giving employees five to ten medical plan options to choose from, capping the employer contribution at a defined amount and giving them a nice web based interface to model their needs and pick a plan. It wasn’t long before the questions began rolling in.

Question #1: “Does it reduce health care spending?” No, in fact carriers are building in adverse risk charges of 2% to 3% to account for sicker employees taking the richer plans etc.

Question #2: “Does it absolve the employer from ERISA liability or PPACA regulations?” No it’s still a group plan and subject to all of the old group plan responsibilities.

Question #3: “Is it free?” No it’s about a $60 to $100 per employee per year admin cost.

Question #4: “Are your clients pushing for this and what need does it solve?” I’ve talked to dozens of clients in the past year about the concept and aside from insulating the employer (not the employees) from a cost increase at renewal, they don’t really get the value.

Question #4: “Well if multiple carriers are competing for lives in the Exchange wont prices come down?” Carriers will not be competing. These are single carrier exchanges where one carrier offers employees multiple plan designs. Only one or two multiple carrier exchanges exist in the country, for companies with over 100,000 employees and the results are mixed so far.

So finally one astute attendee piped up and said “These sound like repackaged cafeteria plans, why are they so popular? I assume you guys are going to sit back and watch?” My response, or at least in my own head was, “I missed the Kardashian wave, it’s too late to catch up on Khloe’s and Kim’s weddings, babies or the purchase of Justin Beiber’s house. An entire country can’t be wrong.” And then I said out loud, “We will be rolling out our Private Exchange soon.”

About the Author

Christopher Nadeau is a Principal at William Gallagher Associates and head of the Employee Benefits Group. Mr. Nadeau counsels his department to develop and redesign employee benefits programs to match the corporate philosophy, long-term needs and objectives of their clients. He is also an industry leader on Healthcare reform and the cost impact and administrative burden on employers.

617.646.0351 | CNadeau@wgains.com | Follow Chris @Chris_Nadeau

  1. Bolick, Louisa C.
    March 10, 2014 at 4:12 pm


  2. Larry Mitchell
    March 11, 2014 at 2:13 pm

    Thank you, Christopher, for restoring my confidence in myself with respect to my reactions to both private exchanges and the Kardashians

  3. M. Curry
    March 11, 2014 at 3:14 pm

    Thanks for pointing out what I had suspected. The Emperor is not wearing any clothes!

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s