Fidelity’s move last week into the private benefit exchange market may have caught some benefit professionals by surprise but the wealth management giant appears to be well-prepared to compete for employers’ business.
The company’s exchange online marketplace has been quietly operating in New York and Massachusetts with a handful of employers – Fidelity’s not saying precisely how many – for about a year and offers access to a network of national and regional carriers with the following products: health insurance (medical, dental vision), life and AD&D insurance, long- and short-term disability insurance, flexible savings accounts (health, commuter and dependent care), tax-advantaged accounts (health savings accounts and health reimbursement arrangements) and wellness tools, including telemedicine, mindfulness and cost transparency tools.
And Fidelity is aiming the exchange, called Fidelity Health Marketplace, at the fastest-growing segment of the market – small and midsize firms.
“Today, technology helps us to do almost anything online and benefits should be no different, regardless of a business’ size. We’ve created a user-friendly online experience that centralizes all of an employee’s health benefits in one place while alleviating the burden of benefits administration and expanding choice for this underserved market,” says Joe Laurin, president of Fidelity Health Marketplace.
The move “should be viewed as another shot across the bow, sending a signal to the market that this is not business as usual,” says Joe Markland, president and founder of HR Technology Advisors, an HR and benefits technology consulting firm.
Most small companies are underserved by existing brokers, says Laurin, with many small employers still doing paper enrollment.
“So relieving the administrative burden for the benefits admin person, as well as bringing technology, Web technology – this same kind of e-commerce technology we’re all used to in every other part of our life – bringing those things to the employer and employees is really a huge step for a lot of these folks,” he says.
Midsize employers – what we define as companies with 100-2,500 employees – are primarily fueling the [private exchange] growth.
The number of employees taking advantage of private health exchanges increased 35% from last year, with about 8 million enrolled for the 2016 benefit plan year, says Scott Brown, managing director for Accenture’s private health exchange offerings.
“Midsize employers – what we define as companies with 100-2,500 employees – are primarily fueling the growth,” he says.
In its research, Accenture found that large employers have not been as quick to adopt exchanges as the small and midsize companies have.
Differentiation is the key to success in this market, Brown says, regardless of the size of the exchange. “Private exchanges must deliver meaningful actuarial choice and retail-like digital experience, more so than core benefits providers,” he says.
Ashok Subramanian, managing director of Willis Towers Watson’s group exchange business and CEO and co-founder of Liazon, a private benefit exchange based in New York, says Fidelity’s move validates “that exchanges are at the forefront of the future of healthcare and benefits delivery.”
He adds that Fidelity’s move also validates the small and midsize employer market as a place of growth.
Fidelity is taking a different approach to its business model than the one Liazon has taken. Fidelity is taking on the role of insurance broker along with its private health exchange, while Liazon works closely with outside insurance brokers to make sure they have access to a whole host of products and services to offer the small and midsized market.
Liazon was bought by Towers Watson, now Willis Towers Watson, back in 2013. What that merger did was allow Liazon to capitalize on the exchange it built for the small to midsized market and bring those same offerings to larger clients.
“The small to midsize market continues to grow year over year,” Subramanian says. The acquisition has “allowed us to take advantage of the other resources and capabilities within the Towers Watson family and bring to those clients our products and our partnerships.”
He points out that Fidelity has a great brand and a great service organization already in place with its 401(k) and HR services operations.
For Fidelity to make an effort to use those assets and capabilities to basically become even more relevant to a client as their insurance broker and provider of a private exchange makes a lot of sense.
“For Fidelity to make an effort to use those assets and capabilities to basically become even more relevant to a client as their insurance broker and provider of a private exchange makes a lot of sense,” says Subramanian. “It will be hard. Folks who try to come into the market have always met with some fierce challenges and fierce competition.”
Fidelity has partnered with a company called hCentive to provide the enrollment engine for the Fidelity Health Marketplace. “We’ve put a lot of effort into redesigning the user interface to make it very simple. … We stripped out all the industry jargon from the site, made it very easy and simple for the employee to navigate and then make good decisions,” says Laurin.
What makes Fidelity’s offering a benefit to clients is that it is integrated with NetBenefits, the 401(k) side of the Fidelity business and what the plan sponsors and their employees already have access to, he says.
Fidelity’s exchange offers a user-friendly interface that gives both employers and employees a quick and easy way to track their benefits online. Employers make use of an online dashboard that allows them to check on how open enrollment is going, how many employees have completed their selections and what types of health plans and other benefits they’ve chosen.
Employees can get on the exchange and self-report changes that would affect their benefits, like getting married, divorced or having a baby. They also have access to health and wellness tools year-round, not just during benefits enrollment.
Customer service is a big part of the equation and is something that sets Fidelity apart from the competition, says Laurin. Companies work closely with an account manager and customer service representatives are on hand to help them choose which benefits to offer employees and answer any questions they have about open enrollment. Employees will have access to a call center whenever they have a question about their benefits.
“There have been a lot of studies done about how exchanges are going to be a big part of the market. I think everyone agrees that the uptake has been a little bit slower than originally predicted. The good news for us is that the uptake that has been growing the most, and has the most interest, is really from this smaller and medium end of the market, so we think we’re targeting the right place and it makes sense,” Laurin says. “There’s a real need here. There’s a real gap in the service and the technology that small and midsize companies are having access to and this is a hallmark of Fidelity – we identify a pain point for our customers and we bring a solution.”
To be successful, private health exchanges will need to deliver in three key areas, says Accenture’s Brown.
If these exchange operators can deliver on the value prop, they can continue to capture a share of the growing market.
“First, they must demonstrate healthcare cost control by either showing savings that come from competition among carriers or from facilitating employee self-selection of less robust plans. Second, they must reduce administrative burden such as providing turnkey solutions for ACA reporting, such as automated task management. And third, they must provide consumers a satisfying digital decision-making experience by not only providing an array of digital tools, but also aligning those tools to business objectives – for example, mobile enrollment,” Brown says.
Private health insurance exchanges “have a unique opportunity to capitalize as employers rethink their benefit strategies. Small to midsized employers in particular continue to face mounting healthcare costs,” adds Brown. “If these exchange operators can deliver on the value prop, they can continue to capture a share of the growing market.”
