The media and insurance industry circles frequently mentionprivate exchanges as an alternative to public marketplace exchangesor traditional insurance plans. A recent survey of employers byTowers Watson and the National Business Group indicated thatone-third plan to move their employee benefit plans to privateexchanges within the next few years. They may be looking to avoidthe headaches and uncertainties involving employee benefits,including spiraling costs and increasing regulations associatedwith the Affordable Care Act (ACA).

But are private exchanges the best option for all employers andfor all health plans, especially for popular dental and visionbenefits?

Explore the Options. Options for dentaland vision coverage will appeal to employers and employees indifferent ways. The key is to match set goals to the option thatoffers the best fit. Most employers rely on brokers and insuranceconsultants to provide reliable information they can use to makedental and vision benefit decisions. They also expect brokers toeducate employees on the choices that will meet their needs andthose of their family members.

Six Factors to Know About PrivateExchanges. Private exchanges, which typically areorganized by brokers, private enterprise or insurance companies,give large and small employers the opportunity to manage benefitcosts, educate employees about coverage choices and simplify planadministration.

There are many private exchange options in the marketplace. It'simportant to recognize the differences to know whether the dentaland vision plans and services offered will meet employee benefitneeds. When reviewing private exchange options, here are sixfactors to consider:

1. Understand the structure. The concept of privateexchanges has been around for years as a different way to providebenefits to employers. The private exchange structure is acollective purchasing system where multiple carriers offer benefitsin one place, which can help make benefit purchases more efficient.Some private exchanges offer a range of medical, dental and visionbenefit choices at varying costs, making it easier for employees tofind options that fit their budgets. Employers often rely onproducers or agents for guidance in this environment.

• Private exchanges may be designed as defined contributionplans, with employers contributing a specific dollar amount foremployees to put toward premiums for the benefits of theirchoice.
• For groups with fewer than 50 full-time eligible employeespurchasing in the private exchange, plans also may includeEssential Health Benefit packages that, under the ACA, medicalcarriers are required to offer to small employers.

2. Review exchange owners and their insuranceexperience. Carefully review the organizers of theexchange to determine their background and experience withinsurance. Ask several questions:

• How is the exchange organized and what is the owners' businessphilosophy?
• How long has the exchange been in business?
• What carriers offer benefits through the private exchange? Whatare their reputations and levels of experience?
• What types of and how many employer groups have committed toparticipate in the exchange?
• What employer industries are represented? Are they a good matchfor your business in terms of the type of benefits your employeesneed?

Most employers are looking forinsurance partners they can trust to provide the benefits employeesneed. It's important that they are comfortable with the exchangeowners and operations. For example, if the private exchangerepresents mostly small employers, it may not be a good fit for alarger group. The risk and administrative costs will be spread outacross all participating employees, which means those from a largeremployer may not receive the level of benefits they hadpreviously.

3. Examine plan designs and options to customizebenefits. Many exchanges feature plans with limitedoptions and flexibility. Some have group plans, while others offerindividual coverage only. This may be an excellent fit foremployers wanting to provide employees with access to insurancebenefits. But it may not be satisfactory for employers who are usedto customizing their plans, or employees who participate in plansthat offer incentives and rewards based on usage. Find out whetherthe exchange will allow access to other group options that offermore flexibility in plan design and if employees have options iftheir life circumstances change.

4. Assess the communication process. It's importantto know who will own the communication relationship with employees.Many exchanges communicate benefits information directly toemployees, and employers may not be involved in the process. Someemployers will welcome the opportunity to hand over thisresponsibility, while those who have communicated benefitsproactively with employees may not.

5. Explore wellness program options. Some privateexchanges include wellness programs as part of their services. It'simportant to know how these programs will operate, including use ofinformation gathered about employees' health and lifestyle habits.Employers need to determine the role they will have in keepingemployees healthy and should make sure they can maintain thesegoals within the private exchange partnership.

6. Evaluate cost savings. The Centers for Medicareand Medicaid Services projects that health care costs will increasemore than 6 percent in 2014, and 6.2 percent thereafter for thefollowing eight years. Employers feel significant pressure to keephealth care costs under control.

The private exchange model, featuring defined contributions foremployee benefits, may be an appealing idea to many employers, butit's important to have a complete picture of associated costs. Forexample, if the private exchange offers only plans with limitedoptions, will employees be satisfied with this choice? Couldemployers experience unexpected turnover, resulting in lostproductivity and higher costs for hiring and training newemployees?

Finding the Right Benefits Solution. Historically, employers have worked alongside producers andinsurance carriers to design benefit plans that fit theiremployees' goals and needs. Private exchanges may be an excellentoption for some employers, but remember that not all privateexchanges are the same. Employers should first clearly define theirbenefit goals and philosophy. Then they can explore privateexchanges, reviewing the structure, plans, communication process,wellness services and projected savings to find the bestpartner.

To find appropriate solutions for employers and employees in2014 and beyond, partner with a trusted dental and vision insurancecarrier that can interpret the true impact of the ACA. If you havequestions or need information about dental and vision plans,your Ameritas dental and vision representative canhelp.

For more information, contact Karen Gustin, senior vicepresident – group field sales, national accounts and broker blocks,at [email protected].

For information about dental and vision insurance and updatesand the ACA, visit www.ameritasgroup.com/reform.