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

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

First of all, he says, the new exchanges will likely be much more expensive than employers and consumers expect. With exchange rates that are artificially lower for older people and higher for younger people, Hunt says he suspects that the exchanges won't attract enough healthy, young people to be viable. “That will hit the fan in two years or so, when the exchanges stop being subsidized.”

Second, Hunt says, many employers are hesitant to switch to a defined-contribution system that lets employees pick their own coverage. “We have found—much to our surprise and gratification—that most employers aren't going to use the exchanges, at least not for the first year or two, because then employees would come back and blame them,” he says. “Employers don't want their coverage and employee moral depending on the vagaries of government.” 

“Even when it sounded as if it were going to be nirvana, most employers thought they wouldn't do anything for the first year or two at the earliest,” Hunt says, adding that the percentage of employers who think they'll stick with what they have has risen since then. “I think there's a feeling that exchanges are looking like a train wreck. These won't be sustainable or insurance companies will lose their shirts.” 

Those that do use the exchanges may be confused by their choices, Hunt says, because brokers won't necessarily be compensated for guiding exchange customers. “There's not a mechanism for brokers to earn commissions on exchanges,” Hunt points out, though some exchanges may ultimately offer broker commissions.

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

Creating private exchanges

On the plus side, Hunt notes, insurance companies and consulting firms are joining forces to create private exchanges. That's what's happening at the Naples, Fla.-based SIP Group, which includes self-insured plan administration and benefits consulting under its corporate umbrella.

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

Rasnick envisions employers who get off the “merry-go-round of rate increases” by giving workers a set amount of money to spend on health insurance and other ancillary benefits. Rather than send them to the public exchange, an employer pays SIP or a company like it to guide employees through the process of choosing from choices presented on a private exchange portal.

Whether insurance companies offer commissions to brokers who sell plans on an exchange or not, SIP intends to pay brokers who bring business to its exchange. “We work closely with brokers and agents and we don't want to lose them. We want to provide our existing agents with an alternative that might let them preserve part of their business, purchasing through a private exchange for full commissions,” Rasnick says.

Engage PEO, based in St. Petersburg, Fla., is working with an insurance company to build a private exchange, says company CEO Jay Starkman. 

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

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

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

“We never only sell just health,” Starkman says, “and we don't take clients with fewer than ten employees.” He adds that Engage already works with employers who offer defined benefits plans to their employees.

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

“We hope to run a single portal for employees to view and purchase their health insurance options, as well as any other ancillary products, in one spot,” says Joshua Weinstein, an employee benefits consultant at Northrim. “We can service all of our clients on our exchange, regardless of their size and funding arrangement, building customized portals for letting employees choose the plans they want.” 

Less paperwork, a system that sends enrollment data to the right insurance company and payroll departments, and guaranteed issuance regardless of pre-existing conditions—which reduces underwriting time—will help streamline Northrim's process and allow it to handle more customers, Weinstein predicts. 

Though the firm's exchange will include the option of human guidance in understanding and choosing benefit plans, the company hopes that “greater efficiency and volume will help make up for lower 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 retain existing customers and build our book of business,” Weinstein adds.

Finding other ways to add value 

Building a private exchange isn't the only way that benefits administrators hope to leverage the Affordable Care Act. 

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

Wilhelm says that Prairie State is working with a large Chicago hospital to help it track Medicare patients, working with them to make sure they understand their condition and comply with their treatment. Ultimately, the effort aims to reduce re-hospitalizations, which can trigger fines for hospitals.

Employers might hire Prairie State to provide similar services as part of a wellness program, but the company doesn't have to rely on 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 about evolving exchange rules before making their plans. 

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

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

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

With any luck, Anderson and other benefits professionals will get more time to learn and plan before the exchanges go live. 

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

Illustration by Sébastien Thibault / www.agoodson.com