Defined Contribution, Private Exchanges and Your Business

A great option you can bring to the table with your groups is that of the defined contribution model—it’s an innovative way for them to keep health care costs in check.

In this model, the employer offers a fixed dollar contribution to each employee. This allows employers to set their annual benefits budget, helping them anticipate their health care costs—and hopefully reduce or stabilize them.

Employees use the fixed amount of money to purchase insurance. This allows them to make their own cost-based decisions about the type of insurance that best meet their unique needs. They have more choices than they’ve typically had before, as well as the opportunity to shop for the coverage they need.

Indeed, the idea of an employer providing funds to employees so they can shop for health care insurance is a pretty avant garde way to offer up and enroll in benefits plans; having user-friendly online tools that help consumers navigate their cost comparison of plans and enrollment in a plan is crucial.

The technological method by which employees can spend their fixed dollar contribution has also evolved. Private exchanges are an effective way for consumers to shop for and compare health care plans as well as manage the finances used to pay for their plans.

This is where private exchanges can help. 

Here are some eye-opening facts about online usage--and how private exchanges can be a key part of your sales pitch:

• More than 85 percent of those online have used the Internet to make a purchase.
• Four out of 10 large companies offer online portals to employees to access such information as benefits, pay stubs, paid time off, tax info and more.
• Ninety-one percent of consumers say they feel more confident about their purchases when they do research online about products.

Through a private exchange, consumers can have an online shopping experience that they're used to in other aspects of their lives for important purchases, but this time it's for health care, dental, vision and other benefits. They can shop and compare services, very much in the same way as they compare, for example, airfare purchases. They'll already have transparency around the dollar amount they have to spend, per the defined contribution model. And with an exchange, consumers can choose and compare different plan factors to based on their needs.

It's a win-win-win situation, really. Employers are happy because they'll have better control over health insurance costs, as well as an easy system in which to deliver the benefits. Employees are happy because there are no surprises about the amount they have to spend, and they can enjoy an online experience when comparing and purchasing benefits. And, you're happy because you've delivered a smart solution to your groups who are trying to navigate changes with health reform!