Private exchanges are health insurance ecommerce websites. Employees and individuals can shop there for a commercial health plan, enroll in it, and purchase other related voluntary products and services. Private exchanges come in two main varieties: Insurer-led and multi-carrier. In the insurer-led case, the exchange is a direct sales channel for one insurance company. This is like buying plane tickets from United.com. The multi-carrier approach is like Kayak.com, where you can shop for plane tickets from many airlines. Unlike public exchanges, which are operated by the federal or state government, private exchanges are owned and operated by health insurers and brokers.
The private exchange experience
When a consumer signs up for insurance on a private exchange, the experience is a lot like buying anything else online. They make selections, add them to a cart, and check out at the end. If they have employer-sponsored health insurance, they may find that their employer is contributing toward their insurance costs, and this works like having a gift card at a retail site.
Behind the scenes, the store has been stocked with insurance options. These plans are likely to include a range of healthcare options, with different amounts to pay as premiums. For a larger premium, the consumer can get lower out-of-pocket costs. Or, they can save money on health coverage by picking a plan with a smaller premium and then spend the money somewhere else on the exchange – perhaps to pay for extra life insurance. They may even decide to spend it on coverage for their pet!
The experience for the consumer feels like personalized shopping. Whether the consumer is enrolling as an individual, or through a large or small group plan, or as a retiree with a pension plan, they can log in and shop. And when it’s time to re-enroll, it doesn’t matter if they’ve retired or left their job in the past year – they can have a consistent experience, and the health insurer can keep them as a customer.
New options with private exchanges
What does this shopping on a private exchange make possible? For consumers, along with eliminating a pile of paperwork, it allows more flexibility to choose insurance that fits their lifestyle. This range of choices wouldn’t have been practical with a cumbersome paper-based process. Private ownership of the exchange also lets consumers spend benefits money more creatively, on things like gym membership or help with quitting smoking. It’s a more holistic way to approach health choices. All of these product options, which are referred to as ancillary or voluntary products because they are add-ons to health coverage, can be delivered through a single shopping experience.
The online interface of the exchange makes possible simpler communication about insurance. With the help of dynamic interactions, the interface can filter information and deliver tips and guidance only when and where they’re needed. The consumer gets more usable information about what they’re choosing.
For employers, the automation of work formerly done by HR saves money. An even bigger cost savings is the opportunity to cap the amount of money they contribute to healthcare costs. The employer can provide a fixed contribution, with the difference is covered by the employee. This is called a defined contribution, and is especially popular among smaller employers.
For brokers and health insurers, automation is again a big benefit. Data that formerly had to be keyed in from faxed forms shows up in their systems via Electronic Data Interchange (EDI). There’s also a new realm of opportunity based on data about how users made their choices. These analytics can help insurers design better experiences for their subscribers, more tailored to their needs.
The biggest opportunity for brokers and health insurers, however, is in satisfying and retaining customers. With a modern shopping experience that’s convenient and designed for simplicity, enrollment can be a differentiator that helps them to compete in the digital age and can help them cultivate lifelong customer relationships.