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Understand your workforce and culture when considering a private exchange approach
Shifting to a private exchange model to provide group health plans to its U.S. workers has saved Hilton Worldwide money and increased employee satisfaction, said Ted Nelson, the hotel chain’s global vice president of benefits.
Nelson spoke before the Employee Benefit Research Institute’s (EBRI’s)
Spring 2015 Policy Forum, held May 14 in Washington, D.C. During
his presentation, he described the positive outcomes Hilton achieved in 2014 after changing from self-insured coverage to a multicarrier, fully insured approach through a private exchange run by the consultancy Aon Hewitt.
The exchange-based group plans now offered to Hilton workers (through a program the company has dubbed “HealthChoice”) give employees “freedom to choose the medical coverage that best fits their needs,” Nelson said, and offer “a large variance in cost when comparing lower-value to higher-value plans.”
Nelson said that for plan year 2014,
the move to HealthChoice reduced an anticipated premium rate increase of 8 percent per employee “down to an overall
decrease of 1 percent, without reducing plan designs or company subsidy.”
He noted further that for 2015, premium “renewal rates for the second year remained at market-competitive levels,” averaging 5.3 percent. “We anticipate annual per capita increases to be consistent with market increases, leveraging our initial savings,” he said.
Along with lower costs, an employee survey showed an 84 percent satisfaction rate with the switch to coverage through the private exchange. Nelson noted that 84 percent of employees “like being able to choose their carrier and associated provider network.”
Communications and education, and ensuring a user-friendly experience, are vital for employee acceptance, he emphasized. These efforts include providing an easy-to-use enrollment website and decision-making tools as part of the exchange experience, including:
• Health plan comparison charts.
• Provider directories for each health plan.
• A prescription coverage comparison tool.
• “Estimate My Usage” and “Need Help Deciding?” tools.
• Links to carrier websites.
Two-thirds of Hilton employees said the exchange platform site was easy to navigate, Nelson recounted. “Do not underestimate your employees,” or their desire and ability to choose plans that best meet their personal and family needs, he advised.
Hopes and Fears
presentation at the EBRI policy forum by Chris Calvert, senior vice president and health practice leader at Sibson Consulting, described feedback he has received from employers that have made the move to one of the growing number of private exchanges (or anticipate doing so), and those that have considered it and decided against such a move.
Among employers that have adopted private exchange-based coverage, their motivations included:
• Lessening administrative burdens on HR staff post-Affordable Care Act. Movement to an exchange has allowed these employers to offload many (although not all) compliance responsibilities and costs.
• Opportunities for premium rate savings, in part from carriers competing for employees’ business through the exchange.
• An ability to provide more options to employees than HR was previously able to administer.
From those that decided to maintain their employer plans, their concerns included:
• Not ready to be a first adopter of significant change.
• Worries about too much change imposed on employees.
• Concerns with being stuck with a bad decision.
• Belief that an exchange approach doesn’t provide value that can’t be offered through in-house administration.
• Prefer to manage benefits on their own.
It’s important to “understand your workforce and culture when weighing whether a private exchange model would be appropriate,” Calvert said.
Paul Fronstin, director of Health Research and Education at EBRI, noted
in his presentation that in 2015, private exchanges had enrolled up to 6 million covered employees, or some 5 percent of U.S. workers who receive employer-provided (or, with private exchanges, employer-facilitated) group health coverage.
By 2020, EBRI expects this number to rise to at least 13-15 million covered employees, or 10 percent of the U.S. workforce. Other estimates offered by consultancies and exchange providers tend to be substantially higher, Fronstin acknowledged.
The primary appeal of private exchanges, he said, is that they are a means to offer “defined contribution health plans” with a flat subsidy paid by employers and “expanded choices for employees regarding how much they want to spend toward the level of coverage they feel they need.”
He also stressed the variety of employer options among private exchange platforms, including single-carrier or multiple-carrier exchanges, self-insured and fully insured group health plan exchanges, and the possible inclusion of dental, vision and other voluntary benefit options on a shared platform with health care benefits.
Sibson Consulting’s Calvert cautioned that, when voluntary benefits are included on a private exchange, it’s important for employers to first know, and then “to inform employees whether representatives offering advice on these benefits are being paid on a commission basis” for their sale.
Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter
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