2016

HEALTH CHECK SURVEY:

The Evolution of Private Exchanges as eCommerce Platforms for Health Insurance

Health Check Survey: The Evolution of Private Exchanges as eCommerce Platforms for Health Insurance arrayhealth.com |

Executive Summary

Now in its fourth year, the Array Health Check Survey explores industry trends related to private health insurance exchanges. According to Gartner, most U.S. health insurers have implemented one or more private exchange technology solutions. Now they must figure out how to widen their product shelves and increase the functionality and features of their private exchanges. For some health insurers, the private exchange is their front door to a full ecommerce experience where consumers can purchase a variety of health and ancillary insurance products, health savings accounts and join wellness programs. For others, it is primarily an online enrollment tool that modernizes their approach to enrollment and billing by reducing errors, streamlining processes and providing the online user experience that consumers have come to expect.

The results from this year’s Health Check survey on private exchanges shows that private exchange technology has evolved to meet the needs of insurers and the ever-changing health insurance industry.

The 2014 survey showed that insurer and employer adoption of the private exchange model was on the rise. 2015 examined a more mature market, one in which insurers were beginning to experience true business benefits through implementation of private exchanges.

This year’s results were consistent with years past in some areas, but also show a shift in how health insurers attribute value from private exchanges. For example, respondents continue to realize business value from private exchange implementation and still view a good consumer experience as a key element of a successful private exchange. They also continue to rate the availability of ancillary products as a key element of a positive consumer experience on a private exchange. This year, however, respondents overwhelmingly stated that it was important that the private exchange platform support all lines of business (individual, group, retiree, etc.) and there was consensus around the technical difficulty of integrating with ancillary insurers. A sizeable percentage of respondents this year also noted their organizations are not ready to support the back-end ecommerce capabilities such as processing payments and generating consolidated bills.

While this report provides only a snapshot of industry sentiment around private exchanges, it does support analyst findings and third-party research that confirms an evolution of private exchanges in the market toward more robust and capable health insurance ecommerce platforms.

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Health Check Survey: The Evolution of Private Exchanges as eCommerce Platforms for Health Insurance arrayhealth.com |

Private exchanges continue to demonstrate business value by increasing sales and reducing administrative costs.

The insurer-led private exchange market is becoming more mature. Insurers now recognize the importance of having a single platform for multiple lines of business and are placing greater value on the data generated by their private exchanges.

Insurers are also more aware of gaps in their back-end payment and billing processes to support their ecommerce efforts.

The importance of having a broad product shelf composed of ancillary products is now well established. At the same time, many insurers are finding the technical integration of these products difficult to achieve.

Survey Key Findings

1

2

3

4

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Health Check Survey: The Evolution of Private Exchanges as eCommerce Platforms for Health Insurance arrayhealth.com |

Insurers Realize Business Value with Private ExchangesFor two years in a row, insurers continue to realize business value in private exchanges in the form of increased market share and reduced administrative costs. This year, however, saw recognition of increased revenue as a result of a private exchange.

INSIGHT 1

If you use an insurer-led private exchange to sell to groups and individuals, which areas of your business have been positively impacted by the implementation of the exchange?

0

10

20

30

40

50

60

Marketshare

Revenue MarginsAdministrativecosts

% of respondents

48%52% 52%

19%

45%

39%

12%

18%

2015 2016

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Health Check Survey: The Evolution of Private Exchanges as eCommerce Platforms for Health Insurance arrayhealth.com |

Consumer-Focused Shopping is Key – Three Years in a RowProviding a consumer-focused shopping and enrollment experience continues to be viewed as a must-have for a private exchange to be successful. Generating data, which was ranked last in 2014, has now jumped to second place. This increased focus on data analytics is in line with the health insurance industry’s broadening recognition of data as a prerequisite for successful ecommerce.

INSIGHT 2

Rate the capabilities required for an insurer-led private exchange to be successful 5-point scale

Provide a consumer-focusedshopping and enrollment experience

Generate data that can improvesales and inform productdevelopment and placement

4.8

4.6

4.4

4.2

4.0

3.8

3.6

3.4

3.2

3.0

2014 2015 2016

Integrate with existing employerand insurer systems

Enable multiple funding models(DC and DB)

O�er a comprehensive set ofancillary products

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Health Check Survey: The Evolution of Private Exchanges as eCommerce Platforms for Health Insurance arrayhealth.com |

One Technology Platform is Important to Support All Lines of Business

Nearly 80 percent of respondents said that is either “important” or “very important” for insurers to have one technology platform to support all lines of business.

INSIGHT 3

Not at all important

48%

30%

1%

VeryImportant

Important

Neither/Neutral

21%

How important is it for insurers have one technology platform that supports all lines of business (small group, large group, individual, retiree, Medicare, etc. )?

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Health Check Survey: The Evolution of Private Exchanges as eCommerce Platforms for Health Insurance arrayhealth.com |

Health Insurers Are Not as Ready as They Need to be to Support Back-End eCommerce Capabilities

While health insurers have made significant progress on the providing a modern ecommerce experience to consumers on the front end, billing and payment processing on the back-end continues to pose a challenge. Roughly a quarter of respondents said their organizations aren’t ready to support key parts of their ecommerce business: payment processing and consolidated billing. While more are prepared to process enrollments, almost 1 in 5 still feel unprepared.

INSIGHT 4

Rate your organization’s backend ecommerce readiness. How well is your organization set up to support:

Processing paymentsto ancillary partners

Extremely unprepared

Processing multiplepayments types from

groups and individuals

Generating consolidated billsthat include multiple products

(medical and voluntary)

0% 20% 40% 60% 80% 100%

Unprepared Neither/neutral Very PreparedPrepared

4%

4% 23% 21% 33% 19%

26% 19% 30% 21%

16%31%35%16%2%

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Health Check Survey: The Evolution of Private Exchanges as eCommerce Platforms for Health Insurance arrayhealth.com |

Availability of Ancillary Insurance Still Seen as Critical to Improving the Consumer Experience

In 2015 and 2016, survey respondents acknowledged the important role ancillary products play in improving the consumer shopping and enrollment experience on a private exchange. This year saw a slight increase in the number of respondents who said ancillary products can create ongoing touchpoints. This increase is supportive of the objective for insurers to build member-for-life relationships and more touchpoints is one way of achieving that goal.

INSIGHT 5

What role will ancillary products play in the private exchange market in the next two-to-three years? They will:

0

10

20

30

40

50

60

O�er incentivesto encourage

employer adoptionof private exchanges

Improve consumershopping and

enrollmentexperiences and

overall satisfaction

Position privateexchanges as

go-to platformsfor all insurance

and ancillaryneeds

Create new andmore ongoingtouch points

between sellersand consumers

Not have a material impacton the market

% of respondents

32%27%

47%

59%53%

29%

39%44%

13% 15%

2015 2016

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Health Check Survey: The Evolution of Private Exchanges as eCommerce Platforms for Health Insurance arrayhealth.com |

Integrating with Ancillary Product Vendors is Technically Difficult

The technical integration to add ancillary product vendors to a private exchange is difficult according to the majority of survey respondents. Only 14 percent called the technical integration easy.

INSIGHT 6

Rate the technical integration difficulty of adding ancillary product vendors on your private exchange:

50%32%

14%

Di�cultNeither/neutral

Easy

Very easy2%

Very di�cult2%

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Health Check Survey: The Evolution of Private Exchanges as eCommerce Platforms for Health Insurance arrayhealth.com |

ME THODOLOGY

SURVEY RESPONDENTS

68 leaders from across the health insurance industry responded to the survey. The survey was available online for two weeks in May 2016 and was sent to Atlantic Information Services (AIS) recipients via email. It was also made available in paper to attendees of this year’s Blue Summit in Orlando, Fla.

All decimals in this report are rounded to the nearest percentage point. This may result in certain numerical totals adding up to slightly more or slightly less than 100 percent.

The estimates and opinions expressed in this report are based on the survey results only.

EDITORIAL USE PERMITTED

Excerpts from this report (including charts) may be used for editorial purposes without prior permission from Array Health, provided:

• Array Health is acknowledged as the source of the content• Charts are displayed as published• A link to the full report is included

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Health Check Survey: The Evolution of Private Exchanges as eCommerce Platforms for Health Insurance arrayhealth.com |

About Array Health

Array Health brings consumers and insurers closer together by powering a personalized health insurance experience. Its cloud-based ecommerce software platform enables health insurers to deliver their own branded online exchange— including ecommerce support throughout the value chain of brokers, employers and consumers, across all lines of business. The company’s technology gives employers a new way to control costs and personalizes the health insurance experience for consumers, enabling them to make more informed decisions and to more deeply engage in their health. Array Health is a privately held company based in Seattle.

To learn more, visit arrayhealth.com.

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