Private Exchange Use Expected To Jump

By Cyril Tuohy

InsuranceNewsNet

A new survey by Aon Hewitt finds that demand for private benefits exchanges will soar in the next three to five years as employees use the exchanges, or benefits stores, to buy everything from health care to life and disability coverage to supplemental insurance.

As many as 33 percent of respondents said private health exchanges would be their preferred approach to managing health care in the next three to five years, up from 5 percent now, according to Aon Hewitt’s Health Care Survey of more than 1,230 employers covering in excess of 10 million employees.

At the same time, the number of employers that said they would maintain “traditional trend migration approaches” to health care plunged from 52 percent to 21 percent.

Jim Winkler, Aon Hewitt’s chief innovation officer for health and benefits, said in a statement that while employers remain committed to providing health care to vast swaths of employees – at least for the time being – they recognize the need for new approaches.

Traditional cost-sharing approaches, in which employers negotiate with a carrier and then subsidize or split the costs of health care with employees, are quickly coming to an end.

It is a model that appears to have run its course. Employers are stuck with paying more subsidizing coverage as costs go up, and as employers shift a portion of the cost increases onto employees in the form of higher deductibles and larger copayments.

The good news — for employees — is that the number of employers that expect to exit the employer-sponsored health care market is very small, from 1 percent of respondents who said they expect to leave the market to 5 percent who said they expected to leave the market three to five years from now, the survey found.

Employers offer health coverage to payroll employees because it attracts qualified workers and retains employees and managers.

Private exchanges are popping up around the country and household names – from Walgreens to Sears to Darden Restaurants - have joined Aon Hewitt’s private health exchange.

Scores of other employers have joined exchanges sponsored by the benefits consulting company Mercer and Buck Consultants.

A separate survey, the Retiree Health Care Survey, also found a big jump in the number of companies that intend to stop providing health coverage to the pre-65-year-old retiree population and let them shop for coverage on the public exchanges, Aon also said.

That survey, which canvassed 424 employers covering 3.8 million retirees, found that 20 percent of employers said they would favor moving all or a portion of their pre-65 retiree population to the individual market set up by the federal government and state health officials in the next three to five years, compared with 3 percent of employers doing so now.

Employees and retirees are eligible for Medicare once they reach 65. The Retiree Health Care Survey also found that many companies that offer health coverage to retirees are doing so through a private health exchange.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

© Entire contents copyright 2014 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.