Issue link: https://www.e-digitaleditions.com/i/330423
[ 52 ] HRO TODAY MAGAZINE | JUNE 2014 Without much warning, benefits administration suddenly became a trending topic due to private health insurance exchanges and their role in reshaping the benefits landscape from a defined benefit model to a defined contribution. After what seemed like years of build-up, Aon Hewitt launched its exchange in fall 2012, signing two external clients, Sears Holdings and Darden Restaurants, along with its parent company Aon. 2013 began with many other benefits administration vendors jumping into the private exchange game including Xerox, Towers Watson, and Mercer, but it seemed like it would take some time for this offering to ramp up in the market. Of course there will always be early adopters, but participant rates for exchanges for active employees demonstrate a drastic rise from the first year in which only Aon Hewitt's exchange was available, to the second when the three other vendors had offerings in the market. Being the first to launch a private exchange for active employees has allowed Aon Hewitt to retain the leadership position in terms of participants served with nearly 47 percent of the market, followed by Xerox with nearly 30 percent, Mercer with nearly 20 percent, and Towers Watson with nearly 3 percent. Facilitating such a healthy distribution between the vendors is the fact that each vendor's private exchange model varies. For example, Aon Hewitt offers fully-insured group plans, while Mercer offers fully-insured and self- insured plans as well as voluntary benefits. Targeting is also different: Xerox is focused on organizations with more than 3,000 medically-enrolled employees, Aon Hewitt targets organizations with 5,000 or more medically-enrolled employees, and Mercer's ideal range is between 100 and 100,000 employees. Nevertheless, at the heart of these offerings, administration capabilities are similar and vendor services include: • Open enrollment management; • Online enrollment; • Life event processing; • Evidence of insurability; and • Reporting including premium reporting, payroll reporting, and carrier eligibility reporting. These services will be coupled with typical employee communication methods such as service center, online support, and print and email. One modification, however, will be the synergy between these private exchanges and various consumer-directed savings accounts, namely flexible spending accounts (FSAs), health savings accounts (HSAs), and health reimbursement accounts (HRAs). During the enrollment process on the exchanges, employees are given the opportunity to enroll directly into these consumer-directed accounts. In the last several years, these savings accounts have shown significant growth. For example, in 2012, WageWorks, a provider of consumer-directed savings accounts, reported a 24 percent increase in revenues for such accounts, and in 2013, WageWorks reported a 20 percent increase in revenues year-over-year. This growth is expected to continue as private exchange activity increases. Drivers and Buyer Landscape There are several reasons why organizations are moving toward a defined contribution model for benefits including the three C's: Total Number of Participants 2012 100,000 2013 1,265,000 Changing Benefits Paradigm Private health exchanges may be the answer to the healthcare conundrum. By Amy L. Gurchensky The Benefits Package