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9/24/2015

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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


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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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.

”


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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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


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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Insight #1: Consumer Experience

The quality of consumer experience remains the key capability for success for the 3rd year of the survey.


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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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.


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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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


Before and After

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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

Take the Session Evaluation

nadpconverge.org/eval2015

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