I have heard pitches from many private exchange vendors over the last four years. What I am always struck by are the responses by carriers (and regional brokerage houses) when they see their 10th platform demonstration from a solution provider. There is the moment toward the end of the demonstration where the prospect (future buyer?) asks, so can you help me figure out the two or three areas where you feel you are differentiated in this space. This is a perfect opportunity for the solution vendor to stand up and deliver. Unfortunately, few are doing it right now. There is usually some response that follows about how they think they don’t have competition, despite the prospect blatantly stating the opposite by asking this question.
Some of the bigger private exchange vendors have kind of gotten out of this trap, but the gap afforded by their “differentiation story” is still not too far removed from the others. That brings up a point I want to make–generally, the shopping and enrollment capabilities afforded via a private exchange are rapidly becoming commodities. Table stakes, if you will. No credit awarded for doing it well…just an expectation that it will work. From an employer or carrier’s perspective, all they want is something that does the job, keeps them compliant and makes their lives easier. That last point is important given convenience in the US is the new quality (or so we are told…more on that in a future post). The most convenient players to work with are considered to be of “higher quality” because they have done the work to create a solution that solves customers’ problems.
Given that these platforms are also taking on the burden of extending product reach to grab a diversified consumer wallet share, it’s the back-end group set up and/or enrollment automation, consolidated billing (and ease of reconciliation for all parties) and consumer support services that help to create some separation between the players. There are also new players beginning to better handle the hybrid purchase market between group and individual policies in a single shopping and enrollment instance (and handling the various connectivity requirements of carriers and public marketplaces), and others are starting to more tightly integrate spending account activity with services like Health Advocate to drive a unique benefit (dare I say it, a convenience) for the employee/consumer. We are still in the early days of private exchange growth, but those that focus exclusively on the shopping and enrollment experience may find themselves playing in a low-cost, commodity game soon.
Outside of the platforms themselves, carriers have to look at their role in “the world of exchanges” differently, but can they really get out of their own way and see a unique path forward? If they don’t, it’s only a matter of years until big retailers start to see these things that they don’t (& then things could get interesting).
-Brian