This is the final installment in a three-part series of articles on private health-care exchanges. Part 1 documented growing interest in the products among large companies. Part 2 examined variable aspects of the private-exchange model.
As noted in the previous article in this series, definitions of private exchanges for active employees are many and varied. None of the high-profile ones, though, strays as far from the center as RightOpt, offered by Buck Consultants.
While an expanded roster of health plans that employees can choose from is generally considered a fundamental element of health-insurance exchanges, Buck is an outlier on that point. “Some of our clients are providing a greater choice of plans than they’ve offered in the past, but we don’t require them to,” says Sherri Bockhorst, leader of the consulting firm’s Health Exchange Solutions division.
Rather, Buck contracts with a single insurance carrier in each geographic market (there are hundreds of them in the United States) to provide a portfolio of plan designs, and each employer-customer can offer employees as many of them – or as few – as it likes.
But if there are only one or two options, is it really an “exchange”?
“You could argue that,” Bockhorst admits. “I was at a conference recently where one of our competitors said we were a ‘faux’ exchange. I guess, in a sense, we’re OK with that. Our end goal is to drive costs out of the delivery system to benefit both the members and the employer, and if adding choice doesn’t do that, in our opinion it shouldn’t be offered.”
That’s an interesting viewpoint, considering that many observers believe expanded choice has great cost-saving potential – especially where the employer makes defined contributions that employees can use to help pay for an insurance plan that makes sense for their health profiles and appetite for cost. “Employees choosing from different plans and using the contribution amount might buy less-costly plans,” says Christopher Condeluci, a health-care attorney with Venable LLC. “And the employees might become better consumers of health insurance and therefore utilize fewer services.”
For its part, Buck is promoting RightOpt as a vehicle to help end users “choose, use and improve” – that is, choose and use health plans and improve health-care outcomes. The “choose” part, consisting of decision-support tools for use when electing a plan, is similar to that of Buck’s competitors, Bockhorst allows. The “use” bucket comprises additional tools and services to help employees maximize their use of health benefits throughout the year. For example, RightOpt customers get access to a nationwide network of complex-care providers and telemedicine tools. The “improve” side embeds things like biometric screenings, health assessments, lifestyle coaching and tobacco cessation.
Buck also crunches RightOpt customers’ health-care data to provide intelligence on how to pare their costs, like by identifying excessive usage of high-cost providers in a particular geographic market.
None of that sounds revolutionary, albeit that it’s unusual for such services to be provided as part of a product called an exchange. Any employer can locate and tap such services if it’s willing to bear the applicable costs. Why wrap the “exchange” label around them and thus further confuse the marketplace as to what defines a private exchange?
“We certainly can provide those services for non-exchange customers,” says Bockhorst. “Do we also provide insurance to non-exchange customers? Yes. But [RightOpt], with the way we’ve bundled everything together, with the integrated member experience we’re presenting and the reporting we enable from integrating data [analysis] as well, is more robust than what most employers can manage on their own.”
Indeed. The opportunity for companies to get help in choosing and designing benefits plans and identifying cost-saving opportunities is why Buck and its competitors Towers Watson, Aon Hewitt and Mercer all had many large corporate clients well before they got into the exchange business. To date, a mere handful of companies have signed on to use those firms’ new private exchanges, including RightOpt.
But Bockhorst says RightOpt was developed to meet dual needs voiced by clients and prospects. One was for “a platform for the employer to offer pre-negotiated insurance products with value driven from group purchasing and stringent negotiations, allowing the employer to shift significant vendor management responsibilities from the organization to the exchange while reducing cost.” The other desire was to “mitigate the ongoing [rising-cost] trend of those insurance products through improved member engagement related to both their health and their utilization patterns.”
According to one Buck competitor, Aon Hewitt, the value driven from the stringent negotiations is limited. “They’re picking the winning carrier in each market based on who’s got the best discounts with doctors and hospitals,” says Ken Sperling, Aon Hewitt’s national health exchange strategy leader. “But the fact is that the major carriers are just not that much different – there’s only a 1 to 2 percent spread on the discounts. What happens next year when the winner is not Aetna but United? Are they going to make all the employees switch carriers?”
Bockhorst claims that its clients are actually seeing savings of at least 4.5 percent as a specific result of the market-by-market negotiations. Much of that, she says, comes from aggregating RightOpt customers’ business for purposes of negotiating administrative and program fees with the carriers, as well as winning favorable performance guarantees, audit provisions and data-sharing arrangements. Pricing tiers have been built into the contracts such that pricing improves as the exchange membership grows, she says.
Still, it seems that regardless of the relative merits of Buck’s product, the firm is capitalizing on the current buzz around the word “exchange” to promote a set of services that are extraneous to most people’s comprehension of the term. That might be the most vivid example of why employers considering a private exchange should not assume too much homogeneity among them.