There's plenty of discussion about private exchanges these days.Can a single-carrier platform really be called an exchange? Is anexchange just an enrollment platform with a defined contributioncapability? What if it doesn't include medical? Is it just anenrollment capability wrapped in some new marketing hype? And whatdoes “private exchange” mean anyway? These are all fair questionsand the debate will continue.

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But there may be a more fundamental issue underlying privateexchanges. Even if the exchange carries multiple products frommultiple carriers, the most important issue may be whetherdelivering an exchange to a client changes the position of theexchange owner with respect to that client.

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An employer who commits to offering benefits through a privateexchange mechanism is obviously making a major, strategic decision.The products, access, financing and functionality are all majorstatements that the employer is making to its employees. And it'sone that the employer will probably be very reluctant to walk awayfrom, at least in the short-term. And assuming the employer alsohas adopted a defined contribution strategy, changing platforms canbe a major logistical and financial headache, as well as anemployee public relations disaster.

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On an independently owned platform, brought to the employer bythe broker, products can be changed over time and carriers can beadded or deleted. But the broker who supplied the platform provideris probably assured of being locked in for some period of time.

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On the other hand, if the platform is provided by a carrier,it's likely that any increase in account retention will accrue tothe carrier, not the broker. The employer is unlikely to get rid ofthe carrier (at least as quickly) if the carrier supplies theplatform. That carrier's products will probably persist longer inthe case. The broker may not.

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The real question may be, which party is better positioned inthe account? If the platform belongs to the broker, then the brokeris probably better positioned. If the platform belongs to thecarrier, then the carrier may be better positioned.

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We saw a similar struggle years ago with Section 125. Like then,the real question may be about who is locking themselves into alonger-term relationship with the client.

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