From their work as benefit consultants, Jennie Korth and Melissa Marrero sensed an opportunity in an emerging trend, and they had enough confidence in their instincts to strike out on their own.
Korth and Marrero, who worked for Towers Watson, one of the country’s largest benefit consulting companies, started Health Exchange Resources, a consulting firm that specializes in private exchanges, in February 2013.
Private exchanges are marketplaces where employers give employees and retirees a set amount of money to pick the health plan their choice.
Health Exchange Resources now has about 20 clients, whose sizes range from 1,000 to 50,000 employees, throughout the country. And the two have since been joined by Dave Osterndorf, the former chief health actuary for Towers Watson.
The firm will evaluate competing private exchanges and, just as important, help companies avoid potential problems that can frustrate or even enrage employees and retirees.
There is a long list of tasks, Marrero said, that companies need to do when moving to a private exchange.
The exchanges have made the biggest inroads among retiree benefits, and Korth and Marrero combined have helped about 75 companies move their retirees to exchanges that offer a choice of Medicare Advantage and supplemental plans.
“That’s our calling card,” Osterndorf said.
Korth and Marrero also have helped build and design private exchanges.
The two first worked together on a project involving a private exchange in 2008, when Marrero was at UnitedHealthcare and Korth was at what was then Towers Perrin.
Marrero, a biology and classics major with a master’s in business administration, began her career at General Electric. Korth, a finance major who graduated summa cum laude, began her career at Johnson Controls.
The two were working at Towers Watson when Korth bought up the idea of starting their own firm. One month later, Health Exchange Resources was in business.
“It was a natural segue for us,” Korth said.
The two know what works — and what can go wrong — in a move to a private exchange. They also know the move to private exchanges can be emotional for retirees.
“That’s the No. 1 thing that we counsel employers on — that this is going to be an emotional change,” Marrero said.
The demand for the firm’s services stands a good chance of increasing.
A survey by the National Business Coalition on Health found that 5% of businesses already use private exchanges, and 8% say they will consider moving to private exchanges in the next three years, Brian Klepper, chief executive officer of the coalition, wrote in a blog post on the Health Affairs website.
Other surveys have found a higher percentage of companies considering private exchanges.
Private exchanges generally are set up and run by benefit consultants and insurance brokers who receive a commission on the health plans sold.
Towers Watson, Mercer, Aon Hewitt, Buck Consultants, Willis Group Holdings and Arthur J. Gallagher & Co., for instance, have all set up private exchanges.
Regional companies, such as Diversified Insurance Solutions in Brookfield and Johnson Insurance in Sturtevant, also have set up private exchanges.
Some offer health plans from different insurance companies. Others offer plans with different designs, such as deductibles or networks, from one company.
Health Exchange Resources has developed a scoreboard to help evaluate the exchanges.
“There’s quite a bit of variation,” Korth said.
Customer service, such as the staffing and operation of the call center, is important. So, too, is the software that runs the exchange.
“It has to be smart,” Korth said.
Sophisticated exchanges have checks upfront to ensure each application is complete and accurate. And when someone calls, the information system should be able to track the application, where it stands for approval, when the premium due and a long list of other steps.
Having a system in place to deal with glitches also is important. All this gets complicated — as the problems with the state and federal exchanges set up under the Affordable Care Act have shown.
“Exchanges at the end of the day are about execution,” Osterndorf said.
Health Exchange Resources also understands the plan designs and knows the companies.
For employees, the advantage is more choice. For employers, the advantage is more flexibility in controlling future costs and lower administrative costs.
Private exchanges also could increase competition among health insurers — and, in turn, among health systems.
So far, the majority of Health Exchange Resources’ clients have contacted the firm. But Korth, Marrero and Osterndorf also are drawing on their contacts in the industry.
A project, or engagement, can run from three months to 18 months, though some can last for several years.
Korth and Osterndorf, who are married, work out of Milwaukee. Marrero works out of New York.
The firm recently hired a sales director, and it will add a consultant in the next few weeks. It hopes to have about 10 employees by the end of the year.
The firm has competition, including the big accounting firms.
“We were one of the first, but others have emerged,” Osterndorf said.
He acknowledges that moving from a large consulting firm to a start-up was a transition. But, he said, “I get to make an outsized impact on the next big thing in health care.”
That holds for Korth and Marrero. But there also is another benefit.
“We are building something,” Korth said.
Date: June 24, 2015