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Xcel Brands Featured In Forbes – “Xcel Brands, Isaac Mizrahi and QVC: Partners For Success”

By: Paula Rosenblum

Xcel Brands is the parent company for the Isaac Mizrahi, Judith Ripka and Liz Claiborne New York brands. I had the opportunity to chat with Xcel Brands’ Chairman of the Board and CEO Robert D’Loren last week and learned a lot about the company and its partnership with QVC. We spent most of our time focusing specifically on the Isaac Mizrahi brand, which Xcel has owned for the past two years.

Most people I know think of Isaac Mizrahi as a clothing designer and judge on TV’s Project Runway All-stars. My own first memory of him was as one of the original “cheap chic” designers that helped drive Target TGT +0.83%’s glory days of fashion in the early 2000’s. Prior, he was a high-end fashion designer. Once he moved away from high end fashion, circumstance and fortune put him in the position to bring a design ethos to the masses.

Mr. D’Loren described Mr. Mizrahi’s legacy well: he is the designer that oversaw the democratization of style. Certainly with his role on Project Runway All-Stars and appearances on QVC he continues that legacy. Since selling his business to Xcel Brands, Mr. Mizrahi has been able to spend more time curating the product assortment and less time actually designing it himself. More and more he is the face and the ethos of the brand while Xcel manages both day-to-day operations and finding the right vendors to make the Mizrahi product.

Xcel Brands itself is a hidden dynamo. The company strongly positions itself as an “omni-channel” leader – meaning it reaches customers across any media they choose to interact with: TV, stores, online, social media…wherever the customer goes, Xcel Brands is ready to meet them. Certainly the data is compelling:

  • Isaac Mizrahi Live on QVC reaches 99 Million households in the US and 14 Million in Canada
  • Isaac recently launched an e-commerce site, announced it to the world on QVC, and within moments, over 1,000 new visitors came to the site
  • Since partnering with Xcel Brands, Isaac’s QVC score has gone from a 2.5 to a 4.5 out of 5

How has it moved so quickly and done so much? According to Mr. D’Loren, it’s much more about product than it is about math. The analytics support the art form, rather than driving the entire business. This is something I have generally been paying close attention to. While my background is solidly in technology, I’ve also seen what happens when a company forgets about the intangible art of designing and selecting the right product. It breaks an unspoken promise to the consumer: the Brand promise.

Mr. D’Loren has been a brand manager for a long time. He has owned thirty-two brands, of which seven were retailers. He has produced everything from home furnishings to couture. His President and Chief Operating Officer, Joe Falco is the “product guy” or as he would be called in the industry, the head merchant. They work in the same office, face-to-face doing complimentary work. Mr. D’Loren is responsible for the overall look. His philosophy is simple” “Shopping should be joyful.” And too often, it just isn’t.

With every brand it takes on, Xcel asks itself “What is the brand’s ideal? What is its highest purpose?” That’s how they came to recognize Mr. Mizrahi as the ‘style democratization’ guy. He was the first designer to say you could wear a $1,500 jacket with $50 pants. The key is apparently in matching up high and low end merchandise to their best effect.

The earliest public example of this mixed-metaphor ethos was Sharon Stone at the 1996 Oscars. She wore a Gap GPS +0.99% turtleneck over an Armani velvet coat and Valentino slacks. Designer dresses come and go, yet a quick search on “Sharon Stone gap turtleneck Oscars” will reveal many web sites citing the look as one of the top-ten of all time. She did it again in 1998, wearing her husband’s white shirt with a long skirt designed by Vera Wang. Mr. Mizrahi did not oversee those looks, but he certainly spotted the trend and popularized it.

Once the brand ideal is established, everything is built around it: from messaging and collateral to stores to web sites, to the clothes themselves. Mr. D’Loren believes it’s critical to embed honesty, transparency and into the corporate culture. The way messaging and collateral is delivered depends on the target customer base. As Mr. D’Loren explained, Millennials want to ‘get behind the ropes’. They’re not so much fans of traditional marketing. Rather, they prefer streaming media. This extends beyond just the QVC TV show itself, but to supporting messaging as well.

Traditional marketing still plays a role, mostly with the brand’s older demographic groups. This appears to be a coming trend. In fact, my own company, RSR Research, has found in our research that while traditional mass marketing still dominates, retailers are starting to move away from it, towards more personalized approaches. This likely is a function of Baby Boomers moving out of their prime discretional spending years and Millennials rising up to become the next mammoth market.

Retailers and brand managers might take a strong lesson from the parting comments Mr. D’Loren made to me. When I asked him about branding he replied, “What does a brand really mean? It means Trust. Whatever your value proposition or promise is, you have to deliver.”

QVC has been a partner in fulfilling its own and Isaac Mizrahi’s brand promise. Their numbers speak for themselves. I received a long and impressive list from the company’s public relations firm, but the one that stuck with me was this one: of all QVC’s sales, 90% are from repeat customers. How many retailers can say the same?

As I look at a list of retailers who struggle today, I wish they could hang those words in the hallways of their home offices and back rooms of their stores. We’ve become very focused on branding in the retail industry. The explosion of information and selling channels allows a retailer to drive home a branding message daily. But stores, web sites and most importantly, product is where they are meant to fulfill that promise. Doing so is a prescription for success.

Not doing so…well, at best, it’s a bad idea. Over the long haul, it’s a prescription for failure.

Read Original Article on Forbes.com

Atrium Staffing Named to Inc. 5000 for Third Consecutive Year

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Atrium Staffing, America’s fastest-growing woman-owned staffing firm, placed at #3168 on this year’s Inc. 5000, Inc. Magazine’s annual ranking of the 5000 fastest-growing private companies in the United States. The award not only highlights Atrium’s stellar growth, but also highlights a consistent level of expansion and success that is the result of strategic planning and remarkable execution.

Over the last two years, Atrium Staffing has carefully expanded its national footprint with new offices, executives and operational headquarters in Pittsburgh as well as an additional office in San Francisco. This national footprint has also provided a platform to further market the company’s successful Managed Services division that offers Employer of Record (EOR) Payrolling, Independent Contractor Engagement, Recruitment Process Outsourcing and Managed Service Provider engagements throughout the US.

For nearly two decades, Atrium’s Applicant-CentricTM philosophy has guided its success. By dedicating the time and resources to fully understand the needs of clients as well as the career goals of its applicants, Atrium’s Associates stay in their positions three times longer than the industry average. This approach has attracted mid-sized to Fortune 1000 companies seeking to fill Administrative Support, Finance & Accounting, Marketing & Creative, Fashion & Retail, Technology, Scientific and Legal positions.

“Ranking on the Inc. 5000 for a third consecutive year is a reflection of the hard work and dedication of Atrium’s teams, as well as the partnerships we’ve created with our clients to help move their businesses forward everyday,” said Rebecca Cenni, founder and CEO of Atrium Staffing.

Crowdfunding 101: How to talk to new investors

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Published on 8/1/13 by Elaine Pofeldt of Crain’s New York Business

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When Jamie Rosen raised money for DietBetter, a startup he runs in Manhattan, he expected the investors he found to have lots of questions for him, and maybe even want to meet in person. “People want to kick the tires,” said Mr. Rosen, who has raised money for several other Internet startups.

He ultimately raised $308,000 from about a dozen private investors for DietBetter, which offers an online social game called DietBet, in which dieters wager that they will lose 4% of their body weight in four weeks and then share the pot of money if they do. Mr. Rosen says he has enough time to communicate regularly with those investors, using digital tools on SeedInvest, the New York-based crowdfunding platform he used, and in one-on-one conversations and meetings. He has built revenue at the business, which launched in 2011, to the six figures so far.

Mr. Rosen is ahead of the game on investor relations. With the Securities and Exchange Commission gradually loosening restrictions on crowdfunding as a financing alternative, more companies are expected to try raising money this way. But, experts warn, many entrepreneurs may not be focusing enough on communications strategy with investors, with an eye to how they’ll build on it for the long term.

SEC loosens regulation

Currently, crowdfunders are allowed to sell equity only to sophisticated accredited investors. However, the SEC in July lifted a ban on general solicitations in a decision that will allow fundraisers to spread the word using more venues, such as social-networking sites, which is likely to attract a wider pool of wealthy people with money to invest.

Meanwhile, the SEC is considering opening crowdfunding investments to the average Joe, a move that some observers believe could lead to communication gaps, either accidental or intentional.

Mr. Rosen, whose minimum investment was $20,000, raised his money on SeedInvest this past spring. Ryan Feit, a co-founder of SeedInvest and co-chair of the education and training committee for the Crowdfunding Professional Association, says entrepreneurs need to make it clear to anyone investing in a startup that the investments are very risky, need to be diversified and are illiquid.

“If entrepreneurs are not forthright about it, it’s going to be a very big problem,” he said.

Crowdfunder raised $2.7 billion

Investor-relations firms are already touting their services to potential crowdfunders—and the market is growing rapidly. Crowdfunders raised $2.7 billion globally in 2012, up from $1.5 billion in 2011, according to Los Angeles-based research firm Massolution. The total, which includes donations and equity crowdfunding, should reach $5.1 billion for 2013.

Startups that can’t afford outside help will need to master the basics on their own.

Jeff Corbin, chief executive of KCSA Strategic Communications in New York and author of Investor Relations: The Art of Communicating Value, says that entrepreneurs will have to invest time in getting a correct valuation of their businesses so they can price shares appropriately and learn how to communicate a company’s value outside of a thick prospectus filled with legalese.

“If I go to a company’s website and see tons of information about its customers, case studies, video—great content that adds color to the numbers— that helps me to make the case for where the company is going and whether it’s going to continue to grow and my investment is going to appreciate,” he said.

Craig Sher, who raised close to $140,000 in bridge financing from investors on SeedInvest for his business StearClear—a designated-driver service that offers rides to people leaving hospitals on medication or who are otherwise impaired—found that putting together a simple PowerPoint presentation with 12 slides in SeedInvest’s “data room” helped address many common questions from investors who bought convertible notes in the offering. When he held two recent calls with them, he said, “they were mostly asking about exit strategy.”

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Private Exchange Wars

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Published on 8/1/13 by David McCann of CFO

This is the second article in a three-part series about private exchanges. Part 1 documented growing interest in the products among large companies. Next: a profile of an exchange provider with a model unlike most others.

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Just what, exactly, is a “private exchange”?

Almost everyone agrees that it’s an online marketplace for purchasing health insurance where employees select from a menu of plans, usually with more pricing and plan-quality tiers than employers otherwise typically provide. Beyond that, there’s little agreement on anything.

Should a private exchange have multiple insurance carriers, or is it still an exchange if there’s just carrier one that offers a number of different plan designs?

Does it matter if plans offered through the exchange are fully insured or self-insured?

Do employers gain an advantage by making defined contributions to employees that may or may not cover their insurance costs, depending on what plan they choose? Or do the dollars come out about the same when employers take the normal route, funding a portion of their overall health costs with payroll deductions?

For each of those questions, it depends on who you ask. There aren’t just different opinions on what works best for a private exchange. A commonly expressed notion is that if, for any particular entity calling itself an exchange, the answers to the questions aren’t “yes, no, yes, no,” or some other particular collation of yesses and nos, then it isn’t actually an exchange at all.

The points of contention converge into a more fundamental question: Are private exchanges actually beneficial to companies, beyond providing what seems to be a decent employee benefit? Or they more like a mirage, simply a repository of health-benefits plans with financial implications that, at the end of the day, aren’t so different from what employers have been used to all along in the health-benefits arena?

Among the more visible proponents of private exchanges, apart from exchange vendors, isChristopher Condeluci, an attorney with law firm Venable LLP who, as tax counsel to the Senate Finance Committee from 2007 to 2010, helped draft early versions of what became the Affordable Care Act. He counts multiple exchange vendors as clients and says he envisions himself, a few years down the road when the niche is more mature, organizing and leading a private-exchange trade association.

“I believe in the concept,” Condeluci says. Health-care reform initially was a bipartisan effort, and the Republican idea, which he subscribed to, envisioned privately run commercial exchanges taking over as a main source of access to health care and acting to drive cost out of the system. “In my opinion, the manner in which the public exchanges are structured under the Affordable Care Act is the wrong way to go,” he says. “It’s bureaucratic, it costs a lot of money and the exchanges actually have the ability to regulate the market,” because they can kick out insurance carriers whose products don’t adhere to minimum affordability standards.

What Makes a Market Competitive?
The countering idea is that a private exchange is a competitive marketplace. The presence of multiple carriers creates competition which, in combination with tools enabling apples-to-apples comparison of health plans, reins in pricing. “Competition is the very essence of an exchange,” says Ken Sperling, national health exchange strategy leader at Aon Hewitt.

But some of the private exchanges operating today offer employer customers a choice of multiple-carrier and single-carrier options. Price is still reined in with the latter, they say, because experience shows that when given expanded choice end users will, on average, choose lower-cost options rather than paying for richer plans with higher benefit levels. The key is not expanded choice of carriers but rather expanded choice of plan types, this thinking goes.

Several exchange vendors, including Liazon, Bloom Health and Aon Hewitt, have released research results purporting to prove that employees generally will go down-market if they can. There is a paucity of similar research from unbiased sources that is particular to private exchanges, but there is a wealth of evidence that health-care consumers lean toward lower-cost coverage.

For example, a 2011 study by Rand Corporation, the nonprofit policy research and analysis organization, concluded that if 25 percent of people with employer-based health insurance were able to elect a consumer-driven health plan and did so, cost savings in the nonelderly population would be 1 to 2 percent of overall health-care spending. At 75 percent penetration, savings would range from 5 to 9 percent.

“An exchange can right-size employees’ medical coverage,” says Eric Grossman, exchange business leader at Mercer. “At most companies, a majority of employees are overinsured.”

One private-exchange vendor, Buck Consultants, goes further than offering a choice between single and multiple carriers. That is, the single-carrier model is all that it offers. Carriers compete for the right to Buck’s business in each geography, and the winner provides a slate of plans employees can choose from.

“The carriers and pharmacy benefit managers are very aggressive in their contracting with us, because if they have all of our business in a certain geography there won’t be any adverse risk selection,” says Sherri Bockhorst, leader of Buck Consultants’ health exchange solutions division, referring to a scenario where people with high-cost medical profiles may comprise a disproportionately large segment of a carrier’s insured population.

Pay Now or Pay Later?
Until fairly recently, most discussion of private exchanges has assumed they work only with fully insured health plans. Now it’s becoming common for exchanges to accept business from employers with self-insured plans as well.

The differences between the two kinds of plans within the exchange context are the same ones that exist outside that context, says Grossman – that is, fully insured plans cost more. “With insurance, one thing that’s certain is that employers have to pay their claims,” says Grossman. “It’s just a matter of when you pay them. Do you want to pay them with a 5 to 6 percent administrative load on top, which you get with a self-insured plan? Or would you rather pay them with a 10 to 15 percent load? We’re talking with very few self-funded clients that have any interest in moving away from that model, even though they may have significant interest in a private exchange.”

Among five large-company customers Mercer has signed up for its exchange for their 2014 benefits-plan years, three are self-funded. Buck also has five such clients on board for next year, and all five are self-funded.

That makes no sense to Sperling of Aon Hewitt, which is sticking with a fully insured-only strategy. “With a self-insured model, there is no price accountability,” he says. That is, a carrier can set the price for its administrative services and use of its health-provider network at an artificially low price in a market-share grab, but it’s the employer that’s on the hook if claims volume is unexpectedly high. “If the employer is comfortable taking that risk, fine, but it doesn’t work in an exchange environment where you’re trying to drive a different outcome through competition,” Sperling says.

In 2012, Aon Hewitt submitted to the carrier market data on 19 large employers that were evaluating the firm’s private-exchange solution. Rate quotes for its fully insured product were actually 1.2 percent lower than the market average self-insured costs for comparable plans, Sperling contends.

Still, one point of view is that companies using either model could save money by using an exchange. Lower-priced health plans typically come with high deductibles and co-payments, which tends to suppress the utilization of medical services. That means a self-insured employer will pay out less to cover claims, and a fully insured one will be able to negotiate better pricing terms with carriers for the next plan year.

“What really drives up the cost of insurance is how people use health-benefits plans once they’re in them,” says Bockhorst. That, she says, is exactly why the self-insured model does work well for a private exchange. Self-insured employers simply have greater access to data on their workers’ benefits usage than do fully insured ones, with insurers never eager to share information that can influence pricing. “You can see whether there’s a bump in the utilization of emergency-room services in Omaha and do a targeted campaign there. We can run reporting on the data to drive strategies around wellness incentives, for example.”

Crystal Ball
The defined-contribution approach to funding insurance purchases through private exchanges – which some view as going hand in hand with the self-insured model – is often said to make employer health costs more predictable.

Large companies overwhelmingly see enhanced cost predictability of as the thing they most like about the private-exchange concept, according to a survey by Benfield Research, which helps health-care suppliers tailor their approach to employers. Among the survey’s 114 participants, all with at least 5,000 employees, 41 percent cited it as the most attractive feature. Less appealing were the opportunity to reduce costs (20 percent), reducing administrative burden (10 percent) and providing employees with additional health-plan options. Eighty-three percent put cost predictability among their top three most appealing features, 35 points more than any of six other answer options.

But costs are predictable with fully insured plans too – at least, if you’re talking about the current year. “Each year you’re going to have different premiums and cost inflation,” notes Benfield co-owner Scott Thompson. “The predictability doesn’t last too long. Yet it’s a major selling feature for the exchanges.” Self-insured costs similarly vary from year to year.

Mercer’s Grossman doesn’t disagree, but he says defined contributions do provide value for employers. “It makes it easier to get over the hurdle of increasing your annual contribution to health benefits by only 2 or 3 percent when the [cost-increase] trend is running at 7 percent,” he says.

But that could also be viewed as an illusory gain. Even without an exchange, companies have been shifting more of the cost burden to employees for 20 years, points out Condeluci. And Grossman doesn’t disagree. In fact, he says, only half of the companies interested in Mercer’s exchange product expect to use the defined-contribution strategy, he says.

Proceed with Caution
Despite all the arguments around the variable elements of private exchanges, they have few unique characteristics. Even Condeluci concedes the differences between them and traditional group benefits delivery aren’t great. “The same laws apply, the same tax treatment applies.”

Not only that, regardless whether a company uses an exchange, it must choose how much choice to give employees and whether to be fully or self-insured. It doesn’t need to have a private exchange in order to shift to a defined-contribution funding strategy.

Thompson advises caution for companies thinking of contracting with a private exchange. In addition to the quantitative aspects of Benfield’s research, it did extensive qualitative interviews with employers, insurance brokers and the benefits consultants. “Many employers told us that they can increase their options internally, create a defined contribution plan, and cap what they’re paying, and they don’t need an exchange to do it,” he says. “The question becomes, how much is the reduction in administration worth and, if you’re moving from a self insured to a fully funded model as with Aon Hewitt, how much is the transferral of risk back to the insurer worth? Because right now we don’t know whether [using a private exchange] is going to save money or cost money.”

Benfield tries to stay neutral in making recommendations to its customers and is not purposely trying to sound negative about private exchanges. “Research is research,” he says, “and some of our research results are different from what we’re hearing from those who stand to gain from private exchanges. Most of the discussion is being driven by the benefits consultants that are offering them. Someone in the market has to be concerned about making sure people have the right information to make the right decision.”

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Big Companies Eye Private Health-Benefits Exchanges

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Published on 7/10/13 by David McCann of CFO

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This is the first of three articles about private exchanges. Next: What’s the best funding model for benefits plans offered through exchanges?

Interest among large companies in private health-insurance exchanges for active employees, which has been incubating for a few years, is poking into the daylight.

Sears Holdings Corp. and Darden Restaurants, customers of the exchange offered by human-capital consultancy Aon Hewitt, remain the only large U.S. companies – defined for purposes of this article as those with multiple thousands of employees – to have publicly acknowledged they’re using an online marketplace to deliver greater choice of benefit plans to employees. But the terrain is clearly changing shape.

All four large consulting firms that have launched private exchanges for active employees during the past year-plus (it’s been fairly common for years for companies to use them for retirees) say they have landed large companies as customers for 2014 plan years.

Mercer recently announced it has booked the first five customers for its Mercer Marketplace exchange. Unlike the other three consultancies, it’s offering the product to small employers (with as few as 100 employees), but these first five have employee counts ranging from 800 to 25,000. Like its competitors, the firm won’t divulge who the customers are at least until they tell their employees of the new arrangement later this year.

Buck Consultants too says it has five customers on board for its product (called RightOpt) for 2014, and they’re even larger than Mercer’s, ranging from 3,000 all the way up to 75,000 employees. Sherri Bockhorst, leader of Buck’s Health Exchange Solutions division, says at least 30 more large companies are working with Buck on potential deals for 2015.

“Those are not just companies we’ve happened to talk to, but rather they’ve given us claims data and are evaluating a solution,” says Bockhorst.

While Buck is offering RightOpt for companies with at least 3,000 employees, the average size of the current and potential clients is about 10,000 to 15,000 employees. That, Bockhorst says, has surprised Buck: “We thought it would resonate more with the 3,000 to 10,000 group. But it turns out that larger employers are looking to get away from the day-to-day administration, contracting and vendor-management work.” Different exchanges are offering differing levels of such services.

Aon Hewitt and the fourth consulting firm, Towers Watson, both say they too have new large customers lined up for 2014, but did not provide additional details.

While companies with thousands of employees comprise most of the customer base for all four firms’ human-capital consulting services, to date most corporate users of private exchanges have been much smaller.

The two biggest private-exchange vendors are Liazon and Bloom Health. Liazon says it has about 2,500 corporate accounts, most of them companies with fewer than 50 employees, but a smattering with hundreds or even a thousand-plus workers. Bloom says it has 185 customers with an average size of 300 to 400 employees, but it too has a handful of larger outliers. Both declined to identify their large customers.

“We expect to continue seeing new enrollment from all market segments, including large groups, with private exchanges being continually discussed and better understood in the marketplace,” says Bloom CEO Simeon Schindelman.

In a recent study of 114 companies with at least 5,000 employees conducted by Benfield Research, a firm that helps health-care suppliers tailor their approach to employers, none of the participants was using a private exchange for active employees. But 43 percent said they were evaluating it as a possible near- or long-term strategy.

But Benfield executives are skeptical for now. “Evaluating is a lot different than using,” says co-owner Scott Thompson. “A lot of companies are looking for information and data, but they’re not ready to push the button just yet.”

Benfield’s research suggests that if large companies do flock to private exchanges in large numbers, it probably wouldn’t happen until 2017 or 2018.

“Private exchanges will play a role in the market, and perhaps a very large role ultimately,” says the firm’s other co-owner, Chuck Reynolds. “But before that happens, large employers will need to see more than hypothetical value. They will need to see the experience of early adopters, and they will be looking at that through a lens that captures a broad range of health, cost, productivity and worker-satisfaction outcomes that will govern the adoption curve.”

Also at issue is the type of large company that might be best suited for an exchange. It’s no accident, observers note, that both Sears and Darden Restaurants are low-wage employers with many part-time workers and high turnover. For example, Robert Galvin, CEO of benefits consultancy Equity Healthcare and former leader of General Electric Co.’s health-benefits department, tells CFO that Sears and Darden “essentially are large versions of the small employers that exchanges were designed for in the first place and are not good bellwethers for the rest of the market.”

But some of the exchange vendors say they are making headway with other kinds of companies. “I would not disagree that at the current time there is tremendous interest in industries like retail, hospitality and others with a high concentration of lower-wage employees,” says Eric Grossman, Mercer’s exchange business leader. “But we are seeing interest, though not for 2014, from industries as wide-ranging as manufacturing, financial services and technology.”

Bockhorst says Buck too is talking about its exchange with diverse kinds of companies. In fact, she says there’s even interest among some with unionized work forces. “They’re talking about using it as an opportunity to renegotiate union contracts,” she says. “It’s a good bargaining chip because it benefits the union members.”

Accenture, meanwhile, is forecasting that private exchanges will catch on in a big way. By 2017, the firm says in a new white paper, approximately 18 percent of American health-insurance buyers will purchase their health insurance through exchanges, both public and private. That is also the year usage of private exchanges will catch up with public exchanges, Accenture predicts.

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Obamacare’s key goal threatened by delayed Web marketplaces

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Published on July 15, 2013 by Dan Mangan of CNBC.com

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Less than 90 days before Obamacare’s government-run health exchanges are due to open up shop, Web insurers are still being locked out of helping sign up uninsured individuals—a lag that threatens to depress enrollments, and jack up insurance rates, experts tell CNBC.

Those experts warned that if dozens of Web-based markets—which already sell insurance online—continue to be shut out of partnering with government exchanges, it could lead to 1 million or more people failing to sign up for insurance under Obamacare.

And, they cautioned, the delay may signal that some of the exchanges won’t be ready for business by the official Oct. 1 target date.

So far, none of the government exchanges being run by the federal government, individual states, or federal-state partnerships has given ehealthinsurance.comand other for-profit Web markets the green light to enroll uninsured individuals under the Affordable Care Act’s subsidized coverage scheme.

“I’m just totally mystified, puzzled, flummoxed as to why the administration isn’t using somebody like me to help,” said eHealth CEO Gary Lauer, whose company is a leading industry player among a dozen or more Web-based markets that have sought to partner with various government exchanges.

Lauer noted that he had been an enthusiastic supporter of the new health law championed by President Barack Obama. But the stone-walling, foot-dragging and other inexplicable hurdles that he says his company has faced in offering subsidized insurance under that law has made him increasingly skeptical of the plan.

“I’m still a supporter of the legislation, I’m dubious of its chances for success,” Lauer said.

EHealth has been in discussions with the U.S. Centers for Medicare and Medicaid Services regarding a Web-based exchange agreement which would allow the company to enroll subsidy-eligible individuals in the states where a federal exchange will be operating, Lauer said.

Last Friday, Lauer said he has “grown confident and hopeful” that eHealth could ink that deal with CMS “very soon.”

But similar hopes by the company on that front have all, to date, come to naught, according to people familiar with the matter.

And Lauer also noted that in the 16 states and District of Columbia, which “are developing their own exchanges, we have yet to enter into a Web-based broker agreement.”

Two big states to Web exchanges: Get lost (for now)

Two of the largest U.S. states running their own exchanges said they won’t allow Web-based marketplaces from helping them enroll potentially millions of people in those states.

California’s exchange told CNBC that it has rejected the idea, at least for the first year, because of technical difficulties of interfacing between the exchange and the Web markets.

“In the first year, we can’t custom interface, we don’t have enough bandwidth, we don’t have the technological capacity,” said Anne Gonzales, spokeswoman for the Covered California exchange.

Ironically, Covered California in 2012 awarded a $359 million contract to Accenture to implement its state health exchange, which was being based in part on software from Web marketplace Getinsured.com. But Getinsured.com itself—like other Web markets—cannot sell subsidized coverage of plans that are available on the exchange because of California’s rejection of that idea so far.

New York State revealed to CNBC on Friday that it has also decided, for now, not to allow the Web-based entities to partner with its exchange. “For the 2014 enrollment process, it’s not feasible to include the Web brokers,” said New York Exchange spokesman Bill Schwarz.

He cited logistical hurdles including ensuring Web marketplaces offer all of the plans available on the state exchange, and creating the technical interface between the exchange and Web sites.

Schwarz—who noted the “tight deadline” to open the exchange—said New York will continue considering whether to use Web marketplaces in coming years.

Lauer and other insurance industry figures said that if Web marketplaces aren’t allowed to sell ACA-subsidized insurance plans being offered on the government exchanges, it could dramatically depress enrollment in Obamacare.

“I think you could be talking 1 million to 2 million people” who don’t end up enrolling, said Lauer, noting that the US government’s goal is getting “6 to-7 million people enrolled in the first year.”

If enrollment is less than projected, that could mean big premium hikes in 2015. That’s because insurance plans are counting on an adequate number of younger, healthier customers—who are more likely to buy things online—paying premiums to offset the cost of benefits to older customers.

“I think Web-based entities being locked out means less people enrolled, a smaller enrollment means a greater risk pool, and a greater risk pool means higher premiums in the future,” said Alan Cohen, chief strategy officer of Liazon, which operates the Bright Choices private benefits exchange.

A March 2012 federal regulation gives Web-based marketplaces the ability to offer insurance plans for sale to people who will be eligible for government subsidies to purchase such insurance being offered by the state exchanges under the ACA.

But the regulation leaves it up to the federal government and states whether to allow Web marketplaces to partner with the individual exchanges they are operating.

Lauer and others argue that having Web markets augment the exchanges would lead to many more people being enrolled under the ACA.

“Last year, 20 million Americans came to eHealth,” noted Lauer, whose online exchange comes up high in Google searches for “health insurance.”

Before the regulation was adopted in 2012, the ACA would only have allowed federal and state insurance exchanges to sell the subsidized coverage. But lobbying of Health and Human Services Secretary Kathleen Sibelius by governors, members of congress and others lead to to the regulation.

The regulation requires those Web sites to offer all of the same health plans that are offered by the government exchanges and let the customer decide which plan to buy—without any incentives to steer the customer’s decisions.

Canary in the coal-mine

Governors backing that idea included Maryland’s Martin O’Malley, who wrote Sibelius a May 2011 letter endorsing using Web-based insurance sites to “supplement the capacity of the state exchanges.”

But as of now, Maryland’s own state exchange has not agreed to allow eHealth or 17 other Web-based marketplaces who have expressed interest the right to enroll subsidy-qualified individuals in the state exchange’s plans.

“We see Web-based entities as potential partners,” said Dr. Joshua Sharfstein, chairman of Maryland’s exchange.

Sharfstein said the state is studying the idea, and expects a decision by September—within just weeks of the Oct. 1 enrollment opening.

“I don’t think this has anything to do with our core readiness” to open the exchange, he said.

But Lauer and others think the delay on allowing participation by Web marketplaces may be a canary-in-the-coalmine indication of overall problems with the exchanges being ready for business by October.

Jane Cooper, president and CEO of Milwaukee-based Patient Care, which advises employees on employer health plans, said she believes the hesitancy or delay in doing so on the part of those exchanges results from “a combination of incompetence and amateurs working on it, and the pressure of everything else going on.”

Cohen, the Liazon executive, said, “I think this is an indicator, a leading indicator, of the exchanges lack of readiness to do the things they actually need to do.”

“Their ambiguity on Web-based entities is probably an indication that the don’t have their act together, so to speak, and they’re probably thinking they’ve got bigger issues than this, and that’s kind of scary, no?” Cohen said.

Cohen also said he doesn’t understand why all state and federal health insurance exchanges did not begin partnering with Web-based for-profit insurance marketplaces long ago.

“I’m agog that they’re not jumping all over this, and saying, ‘Yeah, great, awesome, sign up as many as you can,’” Cohen said. “Why not leverage the economy of scale of a big Web-based entity?”

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Study: Employees often pick lower-cost health plans

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Published on July 9, 2013 by Kelly Kennedy of USA Today

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Sixty percent of employees allowed to choose between a traditional employer-sponsored health insurance plan and a cheaper, high-deductible or limited network plan opted for the lower prices, a study of employees released Tuesday shows.

The data from 2,503 employees in New York and New Jersey showed that 80% of people chose a plan other than their employer’s traditional offering, even if the costs remained the same to the employee, said Alan Cohen, chief strategy officer of Liazon, which provides health exchanges to private employees.

The options included a traditional no-deductible plan, higher-deductible plans in conjunction with health savings accounts, and plans that limited employees to a care network built around one primary care doctor or a limited network around an accountable care organization.

“Most companies were offering high-cost plans and were paying for those plans assuming that’s what employees wanted,” Cohen said. “But when people see the real costs of these plans, they try to save money.”

“With ACOs, they’re barking up the right tree,” Cohen said. “This shows they can be really attractive to people.”The results, Cohen said, show an acceptance of a key part of the 2010 health care law — Accountable Care Organizations, groups of care givers that work together to provide better care at lower costs. Many hospitals are moving toward them because of provisions in the health law that move away from fee-for-service care to coordinated care that discourages duplication, errors and unnecessary procedures.

Each plan’s benefits were the same; just the payment structure differed. For example, Cohen said, if an employer had paid $600 a month in premiums and the employee $100 before, the employee could instead choose a plan that cost $400 a month with a lower employee premium but a higher deductible. The extra $200 a month from the employer could either go into a health savings account or toward another insurance policy, such as life, vision or dental. About half of the employees chose plans with health savings accounts.

“We’ve been seeing these results for more than five years,” Cohen said. “People make completely different choices than what companies make on their behalf.”

The number of people enrolled in health savings accounts (HSA) has more than tripled in the last six years from 4.5 million people in January 2007 to 15.5 million in January 2013, according to America’s Health Insurance Plans, a trade association that represents health insurers.

“HSA plans encourage individuals to take an active role in their health care decisions while stretching their health care dollars,” Karen Ignagni, AHIP president, said in a statement about the new numbers.

Medicare Shared Savings plans now include more than 250 ACOs, while at least 428 private ACOs have formed, according to Health Affairs journal. When the Affordable Care Act passed in 2010, there were 71 private ACOs.

However, Cohen said providing high subsidies through the health exchanges for people who make less than 400% of the poverty level could encourage people to spend more on insurance than they otherwise would.

“It also tells the government they should be concentrating on those bronze and silver plans,” he said, referring to the “metal” payment structures that will be offered through the health exchanges. Health exchanges are websites where people will be able to purchase health insurance by comparing in an apples-to-apples way benefits and and prices. Gold and platinum plans have lower deductibles and co-pays, while bronze and silver plans have higher deductibles and health savings accounts.

In the future, Cohen said he expects to see several options used more widely to lower costs, such as rewards for low cholesterol or keeping diabetes under control, incentives to join gyms and benefits for participating in healthy lifestyle programs.

The data also shows that businesses could save money while providing their employees with more choices, he said. Some of those choices, such as closed-network programs or single primary-care physician-based programs, have been avoided in the past because the common wisdom is that people don’t like being limited by what doctors they may see.

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Study: Employees Often Pick Lower-Cost Health Plans

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Published on July 9, 2013 by Kelly Kennedy of USA Today

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Sixty percent of employees allowed to choose between a traditional employer-sponsored health insurance plan and a cheaper, high-deductible or limited network plan opted for the lower prices, a new study of employees released Tuesday shows.

The data from 2,503 employees in New York and New Jersey showed that 80% of people chose a plan other than their employer’s traditional offering, even if the costs remained the same to the employee, said Alan Cohen, chief strategy officer of Liazon, which provides health exchanges to private employees.

The options included a traditional no-deductible plan, higher-deductible plans in conjunction with health savings accounts, and plans that limited employees to a care network built around one primary care doctor or a limited network around an accountable care organization.

“Most companies were offering high-cost plans and were paying for those plans assuming that’s what employees wanted,” Cohen said. “But when people see the real costs of these plans, they try to save money.”

The results, Cohen said, show an acceptance of a key part of the 2010 health care law — accountable care organizations, groups of care givers that work together to provide better care at lower costs. Many hospitals are moving toward them because of provisions in the health law that move away from fee-for-service care to coordinated care that discourages duplication, errors and unnecessary procedures.

“With ACOs, they’re barking up the right tree,” Cohen said. “This shows they can be really attractive to people.”

Each plans’ benefits were the same; just the payment structure differed. For example, Cohen said, if an employer had paid $600 a month in premiums before, while an employee paid $100, the employee could choose a plan that cost $400 a month with a lower employee premium, but that had a higher deductible. The extra $200 a month from the employer could either go into a health savings account or toward another insurance policy, such as life, vision or dental. About half of the employees chose plans with health savings accounts.

“We’ve been seeing these results for more than five years,” Cohen said. “People make completely different choices than what companies make on their behalf.”

The number of people enrolled in health savings accounts has more than tripled in the last six years from 4.5 people in January 2007 to 15.5 million in January 2013, according to America’s Health Insurance Plans, a trade association that represents health insurers.

“HSA plans encourage individuals to take an active role in their health care decisions while stretching their health care dollars,” Karen Ignagni, AHIP president, said in a statement about the new numbers.

Medicare Shared Savings plans now include more than 250 ACOs, while at least 428 private ACOs have formed, according to Health Affairs journal. When the Affordable Care Act passed in 2010, there were 71 private ACOs.

However, Cohen said providing high subsidies through the health exchanges for people who make less than 400% of the poverty level could encourage people to spend more on insurance than they otherwise would.

“It also tells the government they should be concentrating on those bronze and silver plans,” he said, referring to the “metal” payment structures that will be offered through the health exchanges. Health exchanges are websites where people will be able to purchase health insurance by comparing in an apples-to-apples way benefits and and prices. Gold and platinum plans have lower deductibles and co-pays, while bronze and silver plans have higher deductibles and health savings accounts.

In the future, Cohen said he expects to see several options used more widely to lower costs, such as rewards for low cholesterol or keeping diabetes under control, incentives to join gyms and benefits for joining healthy lifestyle programs.

The data also shows that businesses could be saving money while providing their employees with more choices, he said. Some of those choices, such as closed-network programs or single primary-care physician-based programs, have been avoided in the past because the common wisdom is that people don’t like being limited by what doctors they may see.

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SeedInvest Aims to Fix ‘Broken’ Startup Funding Process

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Published on July 5, 2013 by PENNY CROSMAN in American Banker

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Angel: an attendant, agent or messenger of God. It seems an oddly spiritual way to describe a class of investor. But for entrepreneurs trying to catch a break, the word may feel apt. According to Investopedia, angel investors, who fund early stage startups, give more favorable terms than other lenders. “They are focused on helping the business succeed, rather than reaping a huge profit from their investment. Angel investors are essentially the exact opposite of a venture capitalist.”

SeedInvest, an early stage startup itself, has built an online platform designed to make angel investors’ work easier and help them find the types of startups that match their interests and ideals. It aims to make investing in a startup as easy as buying a stock on E-Trade.

SeedInvest is not a direct competitor to banks, since most financial institutions don’t lend to such young companies. But it is part of the increasingly powerful phalanx of online lenders and crowdfunders that do present an alternative to traditional financial services firms.

SeedInvest also has a technology platform it rents out to investment banks and others to automate all the paperwork and compliance chores involved in funding investment deals.

Co-founders Ryan Feit and James Han formerly worked at private equity firms, realized they wanted to start a company, and went back to business school.

“We both separately realized at Wharton that the early stage fund-raising process was incredibly broken and inefficient relative to later stage investing,” says Feit. “I saw a lot of friends at school who had promising ventures. Many of them threw in the towel after six months,” after spending thousands of dollars and hours driving around Pennsylvania, New York and New Jersey, trying to figure out where the capital sources were.

“It was eye-opening for me. I couldn’t understand why there wasn’t a streamlined process and why people were still driving across the state trying to figure out who would be investors,” Feit says. “It was shocking that the internet wasn’t being used to streamline the process.”

While there are dozens of sites designed for donating money to startups, such as Kickstarter, in 2011 there were no crowdfunding sites for investing in young companies.

Last year, CircleUp and SeedInvest stepped in to fill this void. Both companies hope to take advantage of HR 2930, the Jumpstart Our Business Startups Act, under which certain securities – such as fundraises of less than $1 million – would no longer need to be registered with the Securities and Exchange Commission.

Both companies hark back, in concept at least, to a simpler time on Wall Street, when people invested in companies and leaders they believed in, rather than trying to make a quick buck on a fluctuation in a stock’s value.

SeedInvest works closely with angel investment groups of 50-100 members to facilitate deals. It vets startups before presenting them to the groups — it accepts fewer than 2% of companies that apply. “Sometimes companies apply that are not far enough along — they have to have at least a working prototype,” Feit says. “We look at their products, their competition, their differentiation, their financials and projections. We want to make sure we’re showing investors the right opportunities.”

SeedInvest began doing live deals a few months ago. In May, 130 companies applied. So far, three companies have successfully raised capital on the site: DietBet, a “social dieting” app; StearClear, a smartphone app for finding a designated driver; and LISNR, a music app. SeedInvest is looking to close two deals a month; each is typically $100,000 to $1 million in size.

At the heart of SeedInvest is a technology platform its founders created called SeedInvest Groups that automates the startup investment process. It’s being offered to others, such as investment bankers, on a white-label basis.

“If you think about a small investment bank or broker/dealer that’s raising $100,000 to $10 million for a company, often those are individual investors,” Feit points out. “The way that’s been done for 100 years is all offline. People sign hard copies of legal documents, they send in checks and wires, all the Know Your Customer compliance is done offline. Companies are going on road shows across the country to meet with people to pitch them and do due diligence sessions.”

SeedInvest Groups lets individual investors do all of the above online. They can view data about startups and deals. They can watch videotaped pitches by the startups’ founders and conduct due diligence sessions, taking live questions from the audience. They can do virtual road shows. They can view and sign legal documents and fund the investment through the site. Once a deal is funded, investors in a company can join a virtual board room hosted on SeedInvest.

“Since we’re affiliated with a broker/dealer ourselves, we’ve automated a lot of the very onerous compliance restrictions you have to meet under FDIC and Finra rules,” Feit says. The software automates identity checks, anti-money laundering checks and Office of Foreign Assets Control checks. Payments are handled by an ACH payment provider with whom SeedInvest has integrated its site. Another partner handles escrow accounts.

Douglas Aguililla, director of investment banking at ViewTrade Securities, says his firm plans to white-label the SeedInvest Groups platform so its investors can view information about deals and invest in private companies. “This will give ViewTrade the opportunity to have wider distribution and access to accredited investors,” he says. “We’ll hopefully be able to increase the amount of projects we engage and be able to close more transactions.”

He likes the platform’s simplicity and ease of use. “Once an investor is approved and the correct compliance steps are taken, they can make an investment without speaking to a broker or banker — they can gather information, make a decision, and make the investment online. The investor’s funds are automatically deposited into an escrow account. It’s a very elegant solution.”

SeedInvest Groups will automate some of the procedures involved in the private placement process. This should help position ViewTrade to take advantage of forthcoming rules regarding general solicitation for private placements and crowdfunding for broker/dealers.

SeedInvest itself recently received $1 million in a round of funding led by Jumpstart New Jersey Angel Network. It plans to use the money to hire a few people to help grow the company from its current staff of five.

Why didn’t SeedInvest use its own site to raise funds? “Next time around we might very well do that, but for this round wanted to make sure that we were focusing our platform on other companies,” Feit says.

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The Employer Mandate Has Been Delayed. Will It Be Rewritten?

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Published on July 3, 2013 by ROBB MANDELBAUM in the New York Times

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It seems that almost nobody was ready for the employer mandate in the Affordable Care Act to take effect — not government regulators, not the managers of health insurance exchanges, and not the employers — and that a year’s delay could buy time for the government to write regulations and for companies to figure out how to comply with them. But many businesses hope to get something else from the one-year delay: an opportunity to rewrite other aspects of the mandate that they find difficult.

In particular, businesses are unhappy that the law defines a full-time employee to whom a business must offer affordable health insurance as someone who works at least 30 hours a week. “We’ve argued that the 40-hour workweek is where most people think the full-time work level should be,” said Neil Trautwein, employee benefits policy counsel at the National Retail Federation, a trade association. “It goes to the compliance burden on employers, and employees, and the balance of full- and part-time employees. What happens to people who prefer to work part time, and find their hours reduced to stay under the 30-hour limit?”

A 30-hour threshold, he added, will create “a new class of 29-ers,” workers with schedules set just below the threshold.

Mr. Trautwine and others have portrayed the 30-hour threshold in the Affordable Care Act as a source of confusion and complexity, since the Fair Labor Standards Act sets the full-time workweek at 40 hours (and establishes rules for overtime pay based on that). The lower definition will require many companies to offer insurance to more employees, which would make providing benefits much more expensive — hence the schedule juggling that Mr. Trautwein foresees.

Tracking who is entitled to benefits might also become more challenging for some companies. “It’s all about proving who’s a full-time employee and who’s not,” said Alan Cohen, chief strategy officer for Liazon, which operates a private benefits exchange for employers. “A lot of these employers don’t track hours, so they don’t even know if they’re full time.” One client, a home health care provider, for example, pays its nurses per visit, not per hour. “This company not only has to provide health insurance, but it also has to buy new systems to track hours,” he said.

“Businesses are looking for something that’s easier to administer and doesn’t require them to give coverage to people only working for you for two or three days,” said J.D. Piro, a senior vice president at the benefits consulting company Aon Hewitt in charge of the health law group. The 30-hour requirement, he said, ran contrary to the spirit of the health law overhaul.

“The idea behind the Affordable Care Act is to keep employers in the game and allow them to provide insurance without making major changes either way,” he said, “not forcing them to expand coverage or forcing them to drop coverage for employees.”

Mr. Trautwein, of the retail group, said that the delay would give his group and others time to press their cases to Congress, where, he said, legislation revising the 30-hour rule has bipartisan support. Once the mandate goes into effect, he said, it would be harder to change it. “We really need relief before implementation,” he said. His group would also like to see the threshold for which companies must abide by the mandate increased from 50 employees.

Mr. Piro, however, said he doubted that such legislation would go very far. “I don’t think there are going to be any changes to this act with the current split in Congress,” he said.

A veteran health policy consultant in Washington, who insisted on anonymity, explained the situation this way: “Opponents of the legislation don’t want to fix this issue, they want to use it as fodder to repeal the whole law. They have no interest in moderating or amending the law, because that implicitly affirms that the law is worth amending.”

Meanwhile, the law’s supporters won’t amend the law, the consultant said, because they fear opponents would use the bill to derail the whole law. “We’re really at a point where we implement the law as it was enacted,” he said.

Apparently, lobbyists and benefit advisers were genuinely surprised at the administration’s decision to delay the mandate, but in the current political environment, this consultant said, they should not have been.

“If you understand both the political dynamic and the fact that this executive decision does not undermine the foundation or infrastructure of the law but still allows for being responsive to employer concerns,” he said, “it’s almost a no-brainer that this decision was made.”

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