Towers Watson Joins Aon Hewitt, Mercer As Private Exchange Competition Sizzles

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.

Benefits consultant Towers Watson, as expected, has moved to deploy its recently acquired Extend Health Medicare-eligible retiree exchange as a platform to launch a wider exchange product called OneExchange. The new entity will be the consulting firm’s foray into the defined-contribution exchange market for all ages, not just Medicare-eligibles, and marks the latest effort to attract carriers to participate in markets many think will redefine the way employers offer health benefits to employees.

Competition in the multi-carrier private exchange space is accelerating quickly, with Mercer late last year unveiling a Medicare-eligible retiree exchange market (HPW 12/24/12, p. 1). Aon Hewitt in late 2011 started a multi-carrier exchange aimed at employers with at least 1,000 workers, pushing for business in the under-age-65 population (HPW 12/19/11, p. 5). And myriad health insurers, including Blue Cross and Blue Shield of Kansas City and Highmark, Inc., have launched their own single-carrier exchanges to attract employers interested in moving to a defined-contribution approach.

Ken Sperling, Aon Hewitt’s national health care exchanges strategy leader, tells HPW that he sees growing interest among both employers and employees in the private health care exchange concept. “In fact, according to Aon Hewitt’s data, more than 26% of employers see a future where exchanges are the preferred approach to employer-sponsored health care benefits,” he says.

Employers are definitely eyeing the private exchanges but have not committed en masse to using them for their employees, Steve Wojcik, vice president, public policy for the National Business Group on Health, tells HPW. “Change is coming because of the Affordable Care Act, causing many employers to re-evaluate strategies,” he says. But many employers don’t want to be the first to move, Wojcik adds. “Each company has a benchmark [company] within their industry. If the benchmark moves to a private exchange, you could see mass movement,” he says. The way companies move around the exchanges will likely be akin to how they shop for carriers now, reviewing options every year, Wojcik adds.

Exchange Seeks Customers of All Ages

Bryce Williams, Towers Watson managing director of exchange solutions and CEO of Extend Health, tells HPW the goal of the new marketplace is to take the Medicare exchange and reach out to all other employee groups. “Defined contribution is growing as we have seen in the retiree market and active employee groups. As employers choose to handle their health benefits with defined contribution, OneExchange is a viable, proven option,” Williams says.

He stresses that OneExchange, and for that matter Extend Health, are not single-carrier exchanges. “Our Medicare exchange has over 80 carriers and thousands of plan combinations. This is opposed to one carrier with several plan choices. It is simply not on the same scale. On our Medicare exchange solution, it includes national, regional and micro-market carriers,” Williams says.

By competing with Aon Hewitt and Mercer, among others, he focuses on the advantages of the existing infrastructure already in place with Extend Health. “The main point is that we have a proven existing technology platform. And we have more than 1,200 trained, licensed benefit advisors to help people choose the right plan for their needs during enrollment season. So, an exchange is more than a website. It is a system that finds the best plan that fit the needs of the person, and it takes high technical reliability and high-touch service,” Williams says.

The outlook for exchanges is bright, he says, as the new health reform-mandated public health insurance “marketplaces” gain prominence. “Exchanges, public and private, are obviously going to be an option for all Americans this fall,” Williams says. “Those who are currently employed could get a defined contribution to choose coverage on an exchange; high net-worth individuals [employed or not] may be looking for coverage and may choose to shop on a private exchange; and those who have never had health coverage before will be entering the health insurance ecosystem. There will be solutions for every type of consumer from basic, bronze lower-cost plans to gold-level plans with extensive coverage.”

Sperling says that his company was the first to offer exchange solutions for pre-65 and post-65 retirees. Aon Hewitt’s corporate health care exchange, which serves both active and pre-65 retirees, went live in Jan. 1, 2013, and is marketing multi-carrier, fully insured private health care plans. “To date, close to 100,000 active employees have enrolled in health care benefits through our corporate health care exchange,” Sperling says.

No Fees for Carriers Looking to Participate

Williams says OneExchange will charge no fees for carriers to join or to work with Extend Health. “We are simply paying the embedded commission in each plan, like any other broker,” Williams says. OneExchange insurance products available now include ExtendRetiree for Medicare-eligible retirees moving to an exchange. More health insurance offerings will come after the federal government issues final regulations for implementing the health reform law’s public state-based exchanges, he says.