Arthur J. Gallagher’s move to offer a private-insurance-exchange platform is a smart strategy for leveraging the health-care-reform law into new solutions for employee-benefit clients—but smaller brokers may find it difficult to duplicate such an offering, says one industry watcher.
Gallagher recently announced it would partner with Liazon Corp., a provider of private insurance exchanges, to offer clients the Bright Choices Exchange—an online benefits store for employers to select health, dental, vision, life and disability coverage from various providers. Gallagher’s exchange will serve as an alternative to the state exchanges that will offer coverage under the Patient Protection and Affordable Care Act (PPACA).
The expectation is that small and midsize employers (200 employees or fewer) will be attracted to the private exchange as they seek to control their health-care expenses through defined contributions. Under a defined-contribution plan, employers give employees a set amount of funds to purchase insurance on their own.
The problem is that launching a private insurance exchange is no small task and requires a broker of considerable size in order to provide the services needed, says Rob Lieblein, executive vice president with the agency consulting firm Marsh, Berry & Co.
A private exchange “protects the relationship of the broker, or consultant, with their client, the employer. It gives the employers other opportunities to provide health-care benefits for their employees,” says Lieblein. “Without that, employers will have to decide to play—or pay the penalty [under PPACA] and not offer insurance.”
Many companies, particularly those with 200-250 employees, Lieblein notes, “recognize that providing benefits is a key [strategy] to attract and retain talent. So I think they are looking for other options than the traditional markets have today.”
For brokers, the advantage is that offering a private exchange will help protect their revenue streams, Lieblein points out.
Under PPACA, health insurers are required to spend 80-85 percent of premium on health care—a requirement that is already cutting into agent and broker commissions. And even though agents have access to state exchanges for their clients, the compensation formulas have yet to be developed.
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