John Caldarella, Senior Vice President and National Practice Leader of Aon’s Active Health Exchange, discussed private health exchanges and their impact on today’s organizations during his presentation at the 2018 Chief Financial Officer Leadership Forum in New York on November 28. In his presentation, “The Growing Case for Private Health Exchanges: Using Competition to Control Cost and Increase Employee Satisfaction,” Caldarella offered tips to help organizations determine if private health exchanges are viable options based on their employees’ needs.
Employers often provide workers with insurance coverage, but doing so may be insufficient. For an organization that wants to stand out from the competition, offering a private health exchange to employees may prove to be a terrific solution.
Private health exchanges can be a key differentiator for organizations of all sizes and across all industries. Yet few organizations understand the true value of private health exchanges.
A health exchange enables an organization to offer its employees the ability to purchase different insurance coverages from myriad carriers. Whereas a public health exchange is run by a state or government entity, a private health exchange is managed by an employer.
“At its simplest form, a [health] exchange is just a platform to deliver benefits,” Caldarella pointed out. “It’s how that platform that is deployed that makes it different from a traditional offering.”
Oftentimes, a public health exchange uses risk pooling to calculate premiums based on a group of individuals’ medical costs. On the other hand, a private health exchange offers greater flexibility than public health alternatives. As a result, private health exchanges tend to be less risky and more affordable than public health options.
“Unlike a public health exchange … [a private health exchange] represents a stable and attractive risk pool,” Caldarella said.
Since a private health exchange is operated by an employer, an organization can set up a fixed subsidy related to a private health exchange for a set period of time. In fact, the only thing that changes with a private health exchange is the number of participants over time.
“You set a subsidy that is fixed for the whole year … but the only thing that varies is the number of employees using it throughout the year,” Caldarella noted.
The number of employers to offer private health exchange programs may increase in the foreseeable future, and for good reason. As employers search for ways to stand out from the competition and attract and retain top talent, private health exchanges may help these organizations do just that.
With a private health exchange, an employee can select his or her insurance plan, various coverages and much more. As a result, an employee can pick and choose different coverages and find an insurance plan that falls in line with his or her finances and personal needs.
“Choice itself is of great value,” Caldarella said. “What employees like best in an exchange … is choice of plans and choice of carriers.”
A private health exchange is designed to prevent employees from having to find the right balance between affordability and quality of benefits, too.
“Employees get to choose their plan level and they get to choose their carrier, and that is across the [private health] exchange,” Caldarella indicated. “[Employees] have a choice of benefits … and employees can buy up or buy down based on their own personal circumstances.”
Thanks to a private health exchange, an employee can review a broad array of coverages across different price points. This employee then can select the coverages that he or she needs, as well as avoid purchasing unnecessary benefits. As such, a private health exchange generally offers an optimal combination of economical benefits that match or exceed an employee’s expectations.
“The [private health exchange] model is not a trade-off between cutting costs and creating dissatisfaction,” Caldarella said. “This model has actually been able to control costs and improve satisfaction.”
Furthermore, a private health exchange gives employees flexibility that they may struggle to obtain with alternative insurance programs. Private health exchange carriers commonly offer additional resources and tools to enrollees in comparison to traditional insurance programs as well.
“We look at how do we give a choice to each individual and not each market,” Caldarella pointed out. “Carriers are also putting in more high-performing networks more regularly than those [carriers] that would not be involved in an exchange.”
How an employer approaches private health exchanges may have far-flung effects on this organization and its ability to drive talent engagement and retention. If an employer leverages a private health exchange, it could give its workers a vast assortment of coverage options. This employer also could lower its insurance costs. Perhaps best of all, this employer may use a private health exchange to boost employee satisfaction and retention both now and in the future.
John Caldarella is Senior Vice President and leads Aon’s Active Health Exchange. He is responsible for strategy, growth and operations for Aon’s industry-leading Active Health Exchange.