Aetna not conceding the private exchange space to the benefits consultants

Summary

• Aetna is stitching its inventory of ACO deals into a national ACO network and will offer them on its proprietary private exchange (PHIX)
• Linking ACOs and PHIXs is smart because PHIX’s defined contribution feature creates a strong consumer reward for picking a tighter network product
• Promising a national network of ACOs is bold: ACO deals depend on willing providers and opportunity in local care patterns; in many geographies, the delivery system isn’t ready or interested.
• If Aetna can create a national network, it should be attractive to major employers (usually wary of adopting strategies available to just a portion of their employees) and differentiate its PHIX vs. those run by the benefits consultants.
• A national network of high-value providers is an intriguing model that is longing to be built. Aetna’ network has some very high performing systems, but many obvious names are missing. Who is building the “real” national high-value chain for the PHIXs? The benefit consultants will want you on speed dial.

Insurers and benefits consultants have been tussling over who should own private exchanges (PHIXs). Benefits consultants argue that, by bringing multiple insurers into a marketplace structured to intensify competition, they can offer better value. Insurers’ counter arguments have been vaguer, relying on their greater intimacy with the employer’s healthcare needs and the promise of access to cutting edge products and capabilities held back from the benefit consultant PHIXs.

In the quarterly earnings call a few weeks ago, Mark Bertolini sharpened the Aetna description of that value. He announced plans to roll out two models for Aetna’s proprietary PHIX, the Aetna Marketplace:

• A model focused on key verticals where Aetna has depth and where the “employee populations have similar risks and similar needs” and could benefit from a similar buying experience, care management and set of network models.
• A model leveraging Aetna’s ACO partnerships by offering a “national ACO chain” with an option for “those provider systems can sign up individual and small groups” and “potentially disrupting the national account business by making their purchases more local.”

Both points are good ones:

• The verticals Bertolini cited – healthcare, energy, retail and hospitality — do indeed have unique needs (healthcare employers can be particular how they are themselves positioned in the networks covering their employees; energy often has employees scattered in hard to reach – sometimes international — locations and may place a premium on access, telemedicine options, etc.; retail and hospitality have very different mixes of employees – e.g., shelf stockers vs. management – and complex eligibility processes given varying hours across staff). 
• The combination of ACOs in supportive narrow networks can deliver lower costs (Aetna talks about ~10% savings) but employees can feel like they are paying the price with constrained choice. Putting ACO products in a defined contribution context, however, allows the employees to make the trade-off and enjoy a good portion of the benefit. (We’ve have been arguing that “PHIX + ACO = :-)” since 2012. Note that we use ACO loosely for provider groups taking on population health accountability and incentives, not the specific Medicare-driven reimbursement model)

In addition, benefit consultant PHIXs won’t be able to match Aetna easily, dependent as they are on the participating insurers’ product portfolio.