Arthur J. Gallagher's launch of a private insurance exchange platform marks a start to brokers seeking solutions for their employee benefit clients as the healthcare reform law takes effect, but this strategy will not be easily duplicated by other insurance brokers, notes an industry watcher.
The private insurance exchange will be an alternative to state exchanges—which are to begin offering coverage in 2014—envisioned under the Patient Protection and Affordable Care Act (PPACA).
The problem is that launching a private insurance exchange will require a broker of considerable size in order to provide the services needed to coordinate an exchange, something only national brokers are capable of, says Rob Lieblein, executive vice president with the agency consulting firm Marsh, Berry & Co.
Gallagher is generally regarded as the fourth largest insurance brokerage firm in the United States after Aon, Marsh and Willis Group Holdings.
"The [private exchange] protects the relationship of the broker, or consultant, with their client, the employer. It gives the employers other opportunities to provide healthcare benefits for their employees," says Lieblein. "Without that, employers will have to decide to pay or play—pay the penalty [under PPACA] and not offer insurance.
"I think many employers, particularly in that 200 to 250 life space, recognize that providing benefits is a key benefit to attract and retain talent. So I think they are looking for other options than the traditional markets have today."
Another advantage for brokers is that offering a private exchange will protect their revenue streams, notes Lieblein.
Under PPACA, health insurers are required to spend 80 to 85 percent of premium on healthcare. That requirement is already cutting into agents and brokers commissions. And even though agents have access to state exchanges for their clients, the compensation formulas have yet to be developed, says Lieblein.
Earlier this week, Gallagher announced it would partner with Liazon Corp., a provider of private insurance exchanges. They will offer clients the Bright Choices Exchange, an online benefits store for employers to select health, dental, vision, life and disability coverage, among other benefits, from various national and regional insurance providers.
