| NEW YORK, March 6
NEW YORK, March 6 Shopping for employee health
insurance on private marketplaces might be the way of the future
for tens of millions. However, expert opinions about growth
have been based on projections, not actual consumer behavior in
the exchanges that only really got going last year.
Now one major pilot program has finished its second
enrollment season, there's actual data to evaluate usage as well
as how consumers are faring on the private healthcare exchanges.
The Aon Active Health Exchange, a private health insurance
market run by the benefit consultant Aon Hewitt, enrolled
600,000 employees and family members in 2014, after signing up
150,000 in 2013, according to a report released today.
Traditionally, an employer contracts directly with an
insurance company for employee coverage. Exchanges like Aon's
offer employees the choice of multiple carriers and plans on a
So far, satisfaction is high with the Aon exchange. More
than 80 percent of the participants from the first year picked
the same plan in the second year. Of those who changed plans, 12
percent picked "leaner" plans and 7 percent picked more
"In the first year, we found that employees selected plans
that were most similar to their coverage selection in the prior
year. In the second year, those employees who made active
choices about their healthcare, moved to lower priced carriers
and lower premium tiers," says Howard Riefs, director of
corporate communications for Sears Holdings Corp, which
participates in Aon's exchange.
Other clients include Darden Restaurants Inc and
Walgreen Co. Similar exchanges are run by benefits
consultants Mercer, a division of Marsh & McLennan Companies Inc
, and Towers Watson & Co, but they do not yet have
as much enrollment data.
WellPoint Inc and Buck Consultants, owned by Xerox
Corp also have exchanges, for a total of about 1 million
lives covered on private healthcare exchanges in 2014.
The tier-levels on these private exchanges mimic the
metallic bronze, silver, platinum and gold of the public
exchanges offered through Obama's healthcare reforms, but the
two systems are not associated with each other.
If Aon's exchange ends up being indicative of consumer
behavior, most people will pick a lower-cost plan than they were
previously offered, and then stick with it. Insurance companies
are responding by pricing lower-tier options to steer employees
into these options, and offering ever-narrowing physician
networks to keep prices down.
Overall in 2014, Aon says 66 percent of the enrollees picked
cheaper bronze or silver plans, while 34 percent picked pricier
gold or platinum options, a five percent shift from 2013.
Employer contributions did not decline in 2014, but prices
did rise about 5.1 percent overall, which Aon notes is less than
the industry average of 6 to 7 percent.
There were very few cases, if any, where an employer's
contribution covered or exceeded the entire cost of the
lowest-tier plan, says Ken Sperling, Aon Hewitt's National
Exchange Strategy Leader. However, costs on plans in select
regions could be as low as $5 per pay period.
"Some insurance companies quote bronze and silver at very
attractive levels, because they want to encourage enrollment,"
Sperling says. While the difference in coverage between the
levels is about 10 percent - bronze covers 60 percent of costs,
silver 70 percent, and so on - Sperling says that sometimes the
price jumps were double that.
One insurance company in Aon's exchange dropped out after
the first year, but several other new ones joined in for 2014,
Sperling adds. Some of the carriers also changed the scope of
the physician network offered, mostly to narrow the options and
offer it as a lower-cost option.
Tower Watson has noted this behavior through its own
exchange, and throughout the industry, says Randall Abbott, a
senior consultant with the company. Abbott says that the
exchange concept allows for options to remain dynamic - because
there's not one right plan for everyone.
Consumers will decide if networks become too narrow - as
they did when there was a backlash against health maintenance
organizations in favor of preferred provider networks, Abbott
Towers Watson's latest analysis, also released today in
conjunction with the National Business Group on Health, is
bullish on the private health exchange front, saying two-thirds
of employers find it a viable alternative.
Moody's Investors Service says in a new report that these
exchanges are a win-win for the benefits consultants offering
the services, and that their ongoing relationships with so many
large corporations in the U.S. virtually assure their success.
"It's still quite experimental," cautions Bruce Ballentine,
an author of the report and a vice president at Moody's."It
works if the employee is well-informed about the choices and is
guided through the process."