Is Starbucks Leading or Following?  

The coffee retailer recently moved 160,000 workers to a private health-insurance exchange, following a similar move by a few other high-profile organizations. But why haven't more companies embraced the new exchange model?

Tuesday, August 9, 2016
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Although private health-insurance exchanges were introduced roughly a decade ago, many employers are still not convinced they're a feasible option for providing healthcare benefits to active employees. Adoption has been slow and may not improve anytime soon, market experts say. Among large employers, only 6 percent either use a private exchange or plan to implement one in time for open enrollment next year, according to Mercer's 2015 National Survey of Employer-Sponsored Health Plans.

Among the latest companies to switch is Starbucks Corp., which recently moved its 160,000 workers to a private health-insurance exchange designed and delivered by Aon. Workers will choose from six national and regional carriers and five coverage levels based on their budget and preferred insurance carriers.

But most large employers are still observing from the sidelines, reluctant to participate. Many Fortune 1000-ranked companies cite unproven cost savings (64.6 percent) and level of employee disruption (53.9 percent) as their top objections, according to an online survey conducted earlier this year by Pacific Resources, an independent employee benefits advisory firm in Chicago.  

Nearly 60 percent of respondents also indicated they are not confident that private exchanges are a viable alternative to current methods of providing healthcare coverage to active employees; 42 percent have no plans to evaluate private exchanges; 28.9 percent have evaluated exchanges and decided against using them for active workers and 80 percent want help evaluating exchange vendors.

This adoption hesitation is expected to continue for the foreseeable future, says Sean Clem, vice president of technology, marketplace and engagement solutions at Pacific Resources."There's nothing that we have seen within the last year or anticipate seeing within the next year that will cause explicit growth within the exchange market," he says. "We continue to think it's going to be a slow and steady transition until there is some very material change in the delivery model or legislative landscape."

Meanwhile, Clem says, the exchange market is shifting the conversation away from cost savings to other benefits that exist within the model. For example, exchanges typically offer a variety of decision support tools, additional health benefits and expanded medical choices -- perhaps more overall benefits than a company's internal benefit team can effectively manage.

Although the market is active -- organizations are acquiring exchanges and introducing or revising them -- Clem does not anticipate that the massive explosion of exchange models that hit the market over the last several years will persist. In some respects, he says, the explosion muddied the waters, doing more harm than good by creating ambiguity and confusion.

"The exchange models that were in place three to four years ago are very different from the models today," he says. "Employers need to re-educate themselves on what the models look like today."

Some employers are keeping a close watch. But their primary objective is not cost-savings, but benefits customization, says Craig Jannino, group exchange leader at Willis Towers Watson in Boston. The global consulting group sponsors a 10-year-old private exchange that supports approximately 1,000 employers.

"It's more about changing the conversation with employees and getting employees to choose differently, which gets them to use their benefits differently and produce different outcomes," he says. "It's really starting to change the employee value proposition . . .  . Employees feel more connected to their programs when they get to pick for themselves."

Likewise, employers may also gain administrative efficiencies with an exchange's high-caliber administrative platform that can also deal with the complexities of the Affordable Care Act. That may explain why faster adoption is occurring with small to mid-size companies that have limited in-house resources.

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While Jannino believes the exchange market is still young, he says major companies that switch to exchanges will cause others to take a second look. However, he says exchanges should be viewed as a way of accomplishing corporate strategy and not the strategy itself. For example, take a company that plans on increasing employee engagement levels through health care consumerism and purchasing. Will the exchange help accomplish that objective?

Among the HR challenges of rolling out an exchange is creating the appropriate level of communications, touch points and decision support tools that engage employees throughout the year, not just during open enrollment, he says.

The multimedia communications campaign needs to target company leaders and employees and their families, adds Sharon Cunninghis, a senior partner at Mercer in New York, which supports a three-year-old private exchange for more than 300 employers.

"Help people understand the new benefits program, how it differs from what was in place previously, the added advantages of the new program and available support services," she says. "Secondly, make sure that there's a good, solid project plan from an implementation perspective -- technology, new administrative processes and tools."

Many HR professionals are currently focused on managing healthcare costs over the long term, Cunninghis says, which should help employees better navigate the healthcare system and streamline benefit administration. In the near future, she adds, the exchange market will produce new technology such as decision support tools, consumer programs, ways to use data to help tame medical expenses, and even changes within the delivery of care.

Ultimately, she believes the healthcare industry and individuals will consider insurance exchanges as a "true healthcare destination."

"We are focused on this," says Cunninghis. "That's where we see a lot of potential and trends."

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