Employers Turn to Private Health Exchanges to Cut Costs
By Caroline Chen
Bloomberg, February 19, 2014
One-third of U.S. employers plan to move their workers’ health-care coverage to a private exchange in the next few years, a survey found, following the lead of companies like Walgreen Co. seeking to reduce costs.
While 95 percent of employers said they would continue to offer health care in the next three to five years, 33 percent may use a private exchange to provide the benefit up from 5 percent currently, according to a survey released today by a unit of Aon Plc.
Traditionally, most large employers are self-insured, meaning they take on the financial risk of their employees’ health costs. Under a private exchange, workers are given a subsidy to pick from a limited number of health plans and the insurer takes on the risk.
“Employers are telling us they are losing confidence in their traditional approaches, like vendor changes or employee cost-sharing,” which only deliver “incremental” improvement, Jim Winkler, Aon’s chief innovation officer for health benefits, said in a telephone interview. “Employers are saying, ‘I need to do something different.’”
About 38 percent of the companies surveyed by Aon said they would offer no benefits to part-time workers within the next three to five years.
Retiree benefits are also being reworked. International Business Machines Corp. (IBM) said last year that it would send 110,000 retirees to Towers Watson’s Extend Health, the largest private Medicare exchange.
The Aon survey found that two-thirds of employers who wanted to make changes in retiree benefits were looking to follow IBM’s lead.
Only 25 percent of large employers offer subsidized retiree health benefits, Aon said, down from about 50 percent in 2004.
Aon Hewitt Research: Employers Will Continue Sponsoring Health Benefits for Employees and Retirees, but Deliver Those Benefits in New Ways
Aon, February 19, 2014
According to Aon Hewitt’s soon-to-be-released Health Care Survey of more than 1,230 employers covering more than 10 million employees, 95 percent of employers say they plan to continue providing health care benefits to active employees in the next three-to-five years. However, a growing number plan to move away from their traditional “managed trend” approach, which includes aggressively managing costs through vendor management and employee cost sharing.
Thirty-three percent said offering group-based health benefits to active employees through a private health exchange will be their preferred approach in the next three-to-five years.
Despite having the ability to direct part-time employees to purchase health coverage through the public marketplaces, Aon Hewitt’s survey shows very few employers plan to do so in the near future. Almost two-thirds plan to continue to offer the same level of benefits to part-time employees as they do to full-time employees, with or without an employer subsidy. Just 38 percent plan to offer no benefits to part-time workers in the next three-to-five years.
According to Aon Hewitt’s annual Retiree Health Care survey of 424 employers covering 3.8 million retirees, 20 percent said they are favoring moving all or a portion of their pre-65 retiree population to the individual market/state exchanges to purchase coverage in the next three-to-five years. Today, just 3 percent of employers do so.
According to Aon Hewitt, the number of employers offering subsidized retiree health benefits has slowly declined over the past decade, with just 25 percent of large employers doing so today, compared with approximately 50 percent in 2004.
Of those companies that offer health benefits to post-65 retirees, a growing number of organizations now provide or are seriously considering providing health benefits coverage through the individual Medicare plan market. Aon Hewitt’s annual Retiree Health Care Survey found that 30 percent of companies have already sourced benefits through the individual market―most through a multi-carrier private health exchange. Of those companies contemplating future changes to their post-65 retiree strategies, two-thirds are considering this approach.
“A growing number of employers are leveraging multi-carrier private exchanges for Medicare beneficiaries because they see the value in both the competitive mix of plans offered and the Medicare-specific navigation and advocacy offered by these private exchanges,” said John Grosso, leader of Aon Hewitt’s Retiree Health Care Task Force.
OneExcahnge (previously Extend Health)
OneExchange has helped more than 300,000 retirees find the perfect Medicare plan for their needs and budget. We are the trusted leader in private Medicare exchanges.
Private exchange sees surge in health care enrollment
By Kelly Kennedy
USA TODAY, February 20, 2014
The number of customers on the nation’s largest private health insurance exchange increased by 50% in the final three months of 2013, a direct result of demand created by the Affordable Care Act, the company’s CEO said Thursday.
Gary Lauer, CEO of eHealth Insurance, said individual memberships rose 50% in the fourth quarter of 2013 compared with the same period in 2012, from 113,600 applications in the last three months of 2012 to 169,800 in 2013.
The site operates much like the federal and state exchanges, and now that people have a better understanding of what “exchange” means, they’re drawn to the private sites, as well. In fact, many employers offer private exchange coverage, so employees may pick a plan, and many insurers are creating their own private “exchange” sites, so they can offer more products to consumers.
Those shopping on private exchanges might include business owners who make more than 400% of the federal poverty level, but who couldn’t get insurance before; retirees who are not eligible for Medicare; or people who simply disagree with the Affordable Care Act and choose to find insurance outside the federal and state exchanges — even if those plans are also through private insurers.
Premium rates, Mast said, dropped 25% when the law went into effect, as more people chose the less expensive bronze-level plans.
The activity around the implementation of the Affordable Care Act and the initiation of federal and state insurance exchanges has seemed to stimulate much interest in private insurance exchanges, in all of their various forms. While some may praise the private sector for coming to the fore, we should take a closer look at what this means for patients.
Perhaps the greatest concern is the fact that this Aon survey shows that about 33 percent of employers will be eliminating their own health benefit programs within the next three to five years and start sending their employees to private exchanges to shop for their plans. This gives their employees greater choices in health care coverage, so why should we be concerned?
By providing their employees with what amounts to a voucher, employers are able to control their future health benefit costs by limiting the rate at which the value of the voucher increases. As health care costs continue to increase at rates greater than inflation, the employees will have to bear the additional costs, either through higher premiums or through further cost sharing and limitations in benefits offered by the plans.
This extends the national trend of converting employee benefit programs from defined benefit to defined contribution programs in which both risk and higher costs are shifted from employers to employees. The nation’s workforce is being left behind while the productivity gains are now all going to the top.
eHealth is the largest private insurance exchange, and many are now turning to it to purchase their plans now required by the individual mandate, but there is an important difference between the public and private exchanges. Most people purchasing plans in the federal and state exchanges are purchasing silver plans to qualify for the cost-sharing government subsidies – subsidies which are not provided for bronze plans. But what are people purchasing in the private exchanges?
Silver plans have an actuarial value of 70 percent, leaving 30 percent of costs to be paid by the patient (though adjusted down for credits and out-of-pocket caps, but up for out-of-network care). Bronze plans have an actuarial value of only 60 percent, but these are the plans selected by those shopping the eHealth market simply because they are the cheapest (i.e., they have the lowest premiums). So the concern about the surge in eHealth sales is that far too many individuals will be underinsured – having a plan that will leave them with excessive medical debt should they need significant amounts of health care.
Another form of private exchanges is represented by Towers Watson’s OneExchange – the largest private Medicare exchange – which has found a great market created by employers’ termination of employee retirement health benefit programs. Employers can now send their over-65 retirees to OneExchange where they can select from a variety of Medigap, Medicare Advantage and Part D Medicare drug plans. If you go to their website (link above) you will find that most Medigap plans charge a significant premium whereas most of the Medicare Advantage plans have no premium at all. Just as eHaelth shoppers buy the cheapest plans, no doubt the Medicare shoppers on the private Medicare exchanges will buy the cheapest plans as well – forgoing traditional Medicare and buying the private Medicare Advantage plans instead. Privatization of Medicare marches on.
So these various private exchanges are shifting us to defined contributions, to lower actuarial value plans with greater exposure to health costs, to privatization of Medicare, and to compounding the great divide between the few super-wealthy and the rest of us. This is what we want out of the private market!?
When you think about it, all of this is because we continue to insist that we have a health care financing system in which each individual is shoved into a slot with a given insurance program – a system that has proven to be so expensive and complex that the sources of the funds to pay for health care are looking for ways out. They are taking what deceptively appear to be the cheapest exits when, in reality, total costs just keep going up.
How about getting rid of the concept of a separate plan for each individual. It would be less wasteful, far less complex, and would provide us with much greater value if we had just one comprehensive plan for everyone – an improved Medicare for all. And it would actually work.