Employer Participation in Aon Hewitt’s Corporate Health Exchange Five Times Higher in 2014

Yesterday, we announced that 18 large employers, including Walgreens and 2013 participants Sears Holdings, Darden Restaurantsand Aon plc, will offer health benefits this fall through the Aon Hewitt Corporate Health Exchange. This is five times the number of employers that participated in our exchange in 2013. In total, we anticipate that more than 600,000 U.S. employees and their families will be covered under plans in the Aon Hewitt Corporate Health Exchange in 2014.

We started the journey of our Corporate Health Exchange solution just two years ago in direct response to our clients’ commitment to continue to offer competitive health options for employees and their families in the face of escalating health costs and an evolving reform agenda.

Our idea to create a true marketplace for health insurance was a bold one. We believed that we could do something truly market-changing to redefine health solutions for greater choice, affordability and wellness. But like any game-changing innovation, we faced many questions when we first announced this new approach to employer-sponsored benefits. One of the biggest was whether or not employers would embrace the model. This announcement validates our claims; not only is it sustainable, but interest has increased, and will continue to increase, significantly.

So why is it catching on? Well, as most employers are well aware, the cost of providing health benefits to employees continues to increase every year, and while recent cost trends have been somewhat muted, there are very few who believe health care costs are at all in check. And at a cost to employer of over $10,000 per employee, even a modest increase in volatility from external factors or catastrophic claims can seriously impact a company’s overall financial health—we are a long way from this being a “fringe” benefit.

How does the Corporate Health Exchange provide a solution?

It realigns risks and incentives for increased efficiency and effectiveness. It is fundamentally changing the current landscape by bringing two key concepts into play: competition and choice. The employer first defines the amount of their health care credit, thus determining how much their health care costs will be for the future year (variable only by the number of employees covered by the plan). Employees then use that credit to shop across a set of standardized plans and competing carriers in a retail-like environment. Like most other exchange settings, competition and choice drive down costs and increase accountability, making for an efficient market. It’s a winning value proposition for all parties involved.

Is it working?

It sure is. Last year we sent data on 19 employers representing 350,000 employees to the insurance markets for binding insured rates. Some quotes were naturally more aggressive than others, but in aggregate, across $2.8 billion in premium, rates for comparable exchange plans were 1.2% less than these employers’ self-insured equivalent cost. Was that just a fluke? This year we went to market with 50 employers, representing close to 700,000 employees and $6.8 billion in premium. The result? Exchange rates were 1.6% lower. Companies in the Corporate Health Exchange were able to transfer their risk, fix their subsidies, expand the choice of plans and carriers, and accomplish all of this without increasing cost—to them or to their employees.

What do employees think?

They’re embracing it. According to Aon Hewitt’s recently conducted consumer research, four things really stand out to consumers: choice, competition, control and flexibility. Employees want to be more in charge of their health and benefits decisions and valuetheir freedom to do so. After enrolling last year, a whopping 93% of enrollees said they like being able to choose their own carrier.

They’re becoming more engaged health care consumers. Year one enrollment data showed that the essence of the exchange – the combination of competition and choice – rang through to employees. Last year, we experienced many consumers changing their level of coverage, some electing more, some less. A large number also took advantage of, and spent a lot of time using, decision support tools. This demonstrates that they are actively participating in their health decisions, some for the first time in years.

While this is only year two, we feel very strongly that the Corporate Health Exchange will continue to thrive as a viable strategy for employers who want to remain committed to providing health benefits to employees without further shifting those increasing costs to them.

Interesting in talking to us? Email health@aonhewitt.com to start a discussion.

Ken Sperling is Aon Hewitt’s national health exchange strategy leader.

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