Consider this: The new,public insurance exchanges will include a small minority of people,mostly those who are self-employed or work for very smallcompanies. Most companies will still buy health care benefits thesame ways they do now.

Or this: The new insurance exchanges will usher in major changesin how Americans select and purchase health insurance, givingbenefits industry professionals more than ample reason to figureout ways to adapt to the evolving system.

It all depends on whom you ask. As a group, benefitsprofessionals aren't quite sure what to make of the new healthinsurance changes, which became a virtual certainty with there-election of President Barack Obama and are scheduled to beginsigning up new policyholders in October 2013, with policies inforce as of January 2014. 

“It's a crapshoot right now, and lots of people are trying tofigure out what the land is going to look like,” says Sean Corry,president of Sprague Israel Giles, Inc. in Seattle, and a member ofthe task force that's building Washington's public exchange. “It'sa very complicated market and it's not going to get lesscomplicated when the exchanges come in—at least not for the firstfew years.”

Across the country, some benefits professionals think theexchanges will be a micro-flash in an otherwise largely static pan,and see little need to change business offerings in response tothem. Other pros see the exchanges as the beginning of waves ofchanges, and they're adjusting their businesses accordingly.

Fred Hunt, active past president of the Society of ProfessionalBenefit Administrators in Chevy Chase, Md., is in the first camp.“I don't think exchanges are going to fly,” he says. “I think thereare too many problems.” 

First of all, he says, the new exchanges will likely be muchmore expensive than employers and consumers expect. With exchangerates that are artificially lower for older people and higher foryounger people, Hunt says he suspects that the exchanges won'tattract enough healthy, young people to be viable. “That will hitthe fan in two years or so, when the exchanges stop beingsubsidized.”

Second, Hunt says, many employers are hesitant to switch to adefined-contribution system that lets employees pick their owncoverage. “We have found—much to our surprise andgratification—that most employers aren't going to use theexchanges, at least not for the first year or two, because thenemployees would come back and blame them,” he says. “Employersdon't want their coverage and employee moral depending on thevagaries of government.” 

“Even when it sounded as if it were going to be nirvana, mostemployers thought they wouldn't do anything for the first year ortwo at the earliest,” Hunt says, adding that the percentage ofemployers who think they'll stick with what they have has risensince then. “I think there's a feeling that exchanges are lookinglike a train wreck. These won't be sustainable or insurancecompanies will lose their shirts.” 

Those that do use the exchanges may be confused by theirchoices, Hunt says, because brokers won't necessarily becompensated for guiding exchange customers. “There's not amechanism for brokers to earn commissions on exchanges,” Huntpoints out, though some exchanges may ultimately offer brokercommissions.

Insurance companies that offer plans on the exchanges will haveto deal with government management, a prospect that Hunt fears maycombine with the medical loss ratio rule to drive insurancecompanies from the U.S. market.

Creating private exchanges

On the plus side, Hunt notes, insurance companies and consultingfirms are joining forces to create private exchanges. That's what'shappening at the Naples, Fla.-based SIP Group, which includesself-insured plan administration and benefits consulting under itscorporate umbrella.

“I think a lot of employers in grey-collar and blue-collarcompanies with fewer than 50 employees will get out of the businessof providing health care,” says Steve Rasnick, SIP's president. “Wewrite a lot of business in groups of between 15 and 50, so we're inthe process of establishing a private exchange.”

Rasnick envisions employers who get off the “merry-go-round ofrate increases” by giving workers a set amount of money to spend onhealth insurance and other ancillary benefits. Rather than sendthem to the public exchange, an employer pays SIP or a company likeit to guide employees through the process of choosing from choicespresented on a private exchange portal.

Whether insurance companies offer commissions to brokers whosell plans on an exchange or not, SIP intends to pay brokers whobring business to its exchange. “We work closely with brokers andagents and we don't want to lose them. We want to provide ourexisting agents with an alternative that might let them preservepart of their business, purchasing through a private exchange forfull commissions,” Rasnick says.

Engage PEO, based in St. Petersburg, Fla., is working with aninsurance company to build a private exchange, says company CEO JayStarkman. 

“We partner with Aetna and provide what amounts to an exchange,”explains Starkman, who has served on Maryland's insurance exchangetask group. The portal lets company workers choose their healthcare plans and other benefits, offering them a concierge who helpsthem decide which is the best plan for them. 

Aetna isn't paying broker commissions for plans sold throughthis private exchange. Instead, Starkman says, “we charge theemployer for all of our services, and this is one of them.”

Engage also offers payroll/technology, workers'compensation/safety, human resources/compliance, andbenefits/benefits administration services. Clients must purchaseEngage's payroll/technology services, at a minimum, in order to usethe firm's private exchange. 

“We never only sell just health,” Starkman says, “and we don'ttake clients with fewer than ten employees.” He adds that Engagealready works with employers who offer defined benefits plans totheir employees.

Northrim Benefits Group, LLC in Anchorage, Alaska, is alsobuilding its own exchange, though it doesn't plan to require theemployers who use it to buy additional services. 

“We hope to run a single portal for employees to view andpurchase their health insurance options, as well as any otherancillary products, in one spot,” says Joshua Weinstein, anemployee benefits consultant at Northrim. “We can service all ofour clients on our exchange, regardless of their size and fundingarrangement, building customized portals for letting employeeschoose the plans they want.” 

Less paperwork, a system that sends enrollment data to the rightinsurance company and payroll departments, and guaranteed issuanceregardless of pre-existing conditions—which reduces underwritingtime—will help streamline Northrim's process and allow it to handlemore customers, Weinstein predicts. 

Though the firm's exchange will include the option of humanguidance in understanding and choosing benefit plans, the companyhopes that “greater efficiency and volume will help make up forlower commissions,” Weinstein says.

“We also envision interacting with customers after the purchase,to work with claims. We feel that will be a great tool to retainexisting customers and build our book of business,” Weinsteinadds.

Finding other ways to add value 

Building a private exchange isn't the only way that benefitsadministrators hope to leverage the Affordable CareAct. 

“I see this as an opportunity to move toward holistic healthmanagement,” says Felicity Wilhelm, CEO of Prairie StatesEnterprises, a Chicago-based third-party administrator that offershealth management services.

Wilhelm says that Prairie State is working with a large Chicagohospital to help it track Medicare patients, working with them tomake sure they understand their condition and comply with theirtreatment. Ultimately, the effort aims to reducere-hospitalizations, which can trigger fines for hospitals.

Employers might hire Prairie State to provide similar servicesas part of a wellness program, but the company doesn't have to relyon employers. “We can take our services to exchange plan sponsors.I see an opportunity there,” Wilhelm says.

Learning and waiting 

Many benefits industry pros are waiting to find out more aboutevolving exchange rules before making their plans. 

“I'm trying to learn as much as I can, and the information seemsto be back and forth on where brokers are going to fall. I'm notconfident that I'm going to continue to get paid by the insurancecompanies,” says Robert Anderson, vice president of BenefitsStrategies in Richland, Wash. “When I go somewhere for answers, theanswers seem to be up in the air. I can't tether my ship toanything, because I don't know what's happening.”

In the meantime, Anderson says, he's working with direct primarycare programs, as well as self-funded and partially self-fundedplans. “I can make a significant impact on premium and quality ofcare, plus I can add a broker fee because I'm actually bringingsomething to the table,” he says. 

Despite that, Anderson says these areas typically offer muchsmaller premiums that fully funded plans have in the past. Sellingancillary plans helps him compensate for the difference. “We alsohave to make it up on volume,” he says.

With any luck, Anderson and other benefits professionals willget more time to learn and plan before the exchanges golive. 

“I think that, if possible, the implementation will be voluntaryfor 2014, an option for the states that are ready,” Starkman says.“There's so much data and information to be gathered. I don't seehow it can be ready by October.” 

Illustration by Sébastien Thibault / www.agoodson.com