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9/24/2015
1
Private Exchanges – Trends and Opportunities
Matt Graham, Director - Leavitt Partners
Lance Hood, Senior Director of Marketing -Array Health
September 30, 2015 3:15
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INTRODUCTIONElias Piña – Dominican Republic
INTRODUCTIONElias Piña – Dominican Republic
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HISTORICAL CONTEXTTraditional Linear Benefits Purchasing Model
ProvidersCarriersBrokers/ Benefits
ConsultantsEmployersEmployees
MOUNTING CUMULATIVE PRESSURES
Source: Mercer’s National Survey of Employer‐Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April) 1990‐2013; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April) 1990‐2013.
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DISRUPTIONSExample – Defined Contribution
PrivateExchangeBrokers/
BenefitsConsultants
ProvidersCarriers
EmployersEmployees
BENEFITS CONSUMERISMConsumer Choice – More Than Binary
1. Benefits Paradox: if essential for recruiting and maintaining top talent, why limited choice?
2. Value of broad networks3. Group v. individual purchasing
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IMPLICATIONSTransition From Linear to Hub & Spoke
ProvidersCarriersBrokers/ Benefits
ConsultantsEmployersEmployees
Technology& Service Providers
Providers
Employees Regulators
ACOs
InsuranceCarriers
Brokers
EmployerGroups
BENEFITSEXCHANGE
PRIVATE EXCHANGES UPDATE
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PRIVATE EXCHANGES UPDATE
Of employers with fewer than 100 employees are interested in using a private exchange
Of all employers plan to implement a private exchange by 2018
Of employers are considering moving to a private exchange in the next 3 years
PRIVATE EXCHANGE CONSIDERATIONS
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PRIVATE EXCHANGE VALUE PROPOSITIONSTechnology‐Enabled Insurance Distribution Platforms
PRIVATE EXCHANGE COALITION (PEC) GOALSTechnology‐Enabled Insurance Distribution Platforms
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15© Copyright Array Health Solutions Inc. 2015
Headquartered in Seattle
Founded in 2006
80+ employees and growing
Venture and strategic investors
Array Health
Powering the Best Health Insurance E-Commerce Experience
Deep private exchange experience
Product and technology foundation
Partner integration platform
Market LeadershipOur Company
16© Copyright Array Health Solutions Inc. 2015
Insurer E-Commerce Business
SMALL GROUPSLARGE GROUPS INDIVIDUALRETIREE GROUPS
Direct To Consumer
Broker Channel
Direct SalesMulti-Insurer Exchanges
Public Exchanges
D I R E C TInsurer-Led Private Exchange
I N D I R E C TSearch/Catalog Services
Array Health RoleBuild Direct Digital Channels
Augment Traditional Channels
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17© Copyright Array Health Solutions Inc. 2015
Growing list of features and capabilities
“The list of features and capabilities continues to grow
and private exchange technology vendors are striving to roll out capabilities as fast as payers and their customers request them.
”
18© Copyright Array Health Solutions Inc. 2015
E-Commerce Stack
DATA AND ANALYTICSAnalysis data on prospect and customer behaviors
PERSONALIZATIONTraditional e-commerce functions plus use of healthcare-specific information
EXTENSIVE PRODUCT SHELFBroad range of products that can be managed by insurers, brokers and employers
SHOPPING TOOLSPre-packaged storefronts: Search, cost calculators decision support, comparisons
MULTI-CHANNEL SUPPORTAll pathways: Web, tablet and phone
DEFAULT USER EXPERIENCESupport novice and experienced buyers
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19© Copyright Array Health Solutions Inc. 2015
Here Come the Millennials
Health insurance will be the first large vertical to drive its e-commerce business around Millennials instead of Baby Boomers
First digital-native buyers
Minimal patience for “going through hoops” They will demand intuitive, integrated buying
experience
Base brand value on digital experience even more than personal More likely to trust a tech vendor than an
insurance company
They mainly employees, not individual buyers
They don’t understand health insurance very well
20© Copyright Array Health Solutions Inc. 2015
2015 Health Check Survey
3rd year of survey on private exchanges
100 respondents representing insurers and consultants
Promoted to subscribers of HealthcarePayerNewsand AIS publications
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21© Copyright Array Health Solutions Inc. 2015
Insight #1: Consumer Experience
The quality of consumer experience remains the key capability for success for the 3rd year of the survey.
22© Copyright Array Health Solutions Inc. 2015
Benefits of Insurer-Led Private ExchangeInsurers that offer single-insurer private exchanges are experiencing significant business benefits.
Source: 2015 Health Check Survey
0
10
20
30
40
50
60
Increasedmarket share
% of respondents
45%
32%
43%
48%48%
1199%%
12%
55%52%
Reducedadministrative
costs
Improvedmargins
Increasedrevenue
If you currently use a single-insurer private exchange to sell to groups and individuals, what areas of your business have been most impacted by the implementat ion of the exchange?
If you are planning to use a single-insurer private exchange to sell to groups and individuals, what value do you expect to realize through the implementat ion of the exchange?
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23© Copyright Array Health Solutions Inc. 2015
Insight #3: Ancillary Products
Ancillary products are seen as key to a compelling private exchange experience for consumers, yet exchanges are slow to adopt beyond only the most common products.
24© Copyright Array Health Solutions Inc. 2015
Insight #3: Ancillary Products
Ancillary products are seen as key to a compelling private exchange experience for consumers, yet exchanges are slow to adopt beyond only the most common products.
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25© Copyright Array Health Solutions Inc. 2015
Value Modeling
$21.3
$4.6M
Private Exchange
Online Enrollment
TOTAL IMPACT
$27.9 MILLION
ANNUAL MARGIN IMPACT500K Member Plan($ in millions)
Source: Array Health value model
26© Copyright Array Health Solutions Inc. 2015
Before and After
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27© Copyright Array Health Solutions Inc. 2015
Your Options
Approach Control Reach
Offer a branded private exchange
Partner with health insurers to be on their product shelf
Partner with insurer-led private exchange technology providers
Sell through multi-carrier exchange
Work through brokers and employers to be included on their exchanges
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