Arthur J. Gallagher’s move tooffer a private-insurance-exchange platform is a smart strategy forleveraging the health-care-reform law into new solutions foremployee-benefit clients—but smaller brokers may find it difficultto duplicate such an offering, says one industry watcher.

Gallagher recently announced it would partner with Liazon Corp.,a provider of private insurance exchanges, to offer clients theBright Choices Exchange—an online benefits store for employers toselect health, dental, vision, life and disability coverage fromvarious providers. Gallagher’s exchange will serve as analternative to the state exchanges that will offer coverage underthe Patient Protection and Affordable Care Act (PPACA).

The expectation is that small and midsize employers (200employees or fewer) will be attracted to the private exchange asthey seek to control their health-care expenses through definedcontributions. Under a defined-contribution plan, employers giveemployees a set amount of funds to purchase insurance on theirown.

The problem is that launching a private insurance exchange is nosmall task and requires a broker of considerable size in order toprovide the services needed, says Rob Lieblein, executive vicepresident with the agency consulting firm Marsh, Berry &Co.

A private exchange “protects the relationship of the broker, orconsultant, with their client, the employer. It gives the employersother opportunities to provide health-care benefits for theiremployees,” says Lieblein. “Without that, employers will have todecide to play—or pay the penalty [under PPACA] and not offerinsurance.”

Many companies, particularly those with 200-250 employees,Lieblein notes, “recognize that providing benefits is a key[strategy] to attract and retain talent. So I think they arelooking for other options than the traditional markets havetoday.”

For brokers, the advantage is that offering a private exchangewill help protect their revenue streams, Lieblein points out.

Under PPACA, health insurers are required to spend 80-85 percentof premium on health care—a requirement that is already cutting into agent and broker commissions. And eventhough agents have access to state exchanges for their clients, thecompensation formulas have yet to be developed.