In a nutshell, a private insurance exchange is an online marketing tool. You may look up rates, but underwriting will ultimately determine what the real rates are going to be. Don’t get too excited about these exchanges – you already experienced a similar version over the years, it’s called a spreadsheet. But, as you will see in the commentary below, some get quite excited about the ability to purchase insurance in the privacy of their homes without a pesky salesman breathing down their neck.
I love searching for and booking all my travel needs on one online site like Travelocity. It streamlines the process, minimizes paperwork and saves me valuable time and energy along the way. Some payers are hoping health insurance exchanges can provide a similar value to customers shopping for health plans.
And they’re beginning to put their money where their mouths are. Since last year, private exchanges run by insurers have been cropping up around the country. Highmark and Blue Cross Blue Shield of Kansas City established exchanges last year. WellPoint, Blue Cross Blue Shield of Michigan and Health Care Service Corporation bought a 78 percent stake in Bloom Health, an online marketplace offering health plan options to almost 50 companies. And in Iowa, where state lawmakers decided not to pursue a state-run exchange, legislators are urging insurers to establish their own private exchanges. These privately run marketplaces would be free of government oversight, fees and taxes and would have ample funding available from insurers’ cash in reserves.
“Private exchanges–regardless of the Supreme Court or the election in the fall–are going to reach into all facets of what we do,” Kathy Dunmire, vice president, product management at Blue Cross Blue Shield of Minnesota, told FierceHealthPayer. “Just like today when travelers can book flights, cars and hotels in one place, our industry is going to use private exchange platforms to make the buying process easier, more understandable and less expensive for our members.”
And Dunmire should know. In July, her company will be rolling out its own private exchange called Blue Choice, a defined contribution model for employers run by eHealth.
Blue Cross was motivated to create the private exchange in response to “three, overriding market demands,” Dunmire said. Members wanted more choice and transparency; employers needed greater ability to control costs; and members and employers want easy-to-use solutions and help from Blue Cross and our brokers in navigating the increasingly complex world of health benefits.
Just like booking a flight online, Dunmire explained, Blue Choice allows members to compare multiple plan options and choose the one that’s best for them and their family based on what’s most important to them, for example, monthly premiums, deductibles, network or benefits.
“Our goal for Blue Choice is to give employers more control, agents and brokers a way to provide value to their customers and employees greater choice,” she said.
Further fueling insurers’ interest in private exchanges is the increasing modernization of insurance products and insurers’ need to continually differentiate their brand from their competitors. Plus, exchanges allow insurers to reinforce their value composition to customers, Bill Hanis, vice president of eHealth technology and exchange solutions, said.
“The process is paperless and efficient, with all information at the employees’ fingertips,” Hanis told FierceHealthPayer.
Dunmire echoed that sentiment. “We see Blue Choice–the exchange technology–as a platform for how we do business in a market that is increasingly moving toward an e-commerce model,” she said.
Although there’s no one set purpose for private exchanges, Hanis said, they generally serve as an alternative distribution method for payers to promote their products. “That could be individual, senior, group products; all exist in exchanges and are gaining in popularity,” he said. Indeed, eHealth’s total membership, including individual and family plan enrollees, has increased every year, with a 57 percent increase in total estimated membership from 2007 to 2011.
The growing interest in private exchanges makes Dunmire confident that Blue Choice will serve as a valuable and promising option for many employers. However, she recognizes that it’s still early in the market, so Blue Cross expects “a growth curve similar to that of defined contribution pension plans or consumer-directed health plans.” That’s why Blue Cross made the Blue Choice platform scalable, allowing the insurer to “continue to grow the exchange to meet evolving market needs.”
I look forward to one day lounging on my sofa as I research and eventually purchase my health insurance plan online on my laptop. And then I can switch tabs and quickly book a flight to visit family and, while I’m at it, even order a pizza too. –Dina (@HealthPayer)
