Employer Health Exchanges Akin To ObamaCare Approach See Lower Costs

Mar 6 2014, 12:00am CST | by

Employer Health Exchanges Akin To ObamaCare Approach See Lower Costs
Photo Credit: Forbes Business

Pioneering companies that turned to a new concept of giving their workers money to buy health benefits via private online marketplaces known as exchanges are seeing lower health care costs.

Aon Hewitt, the large employee benefits consultancy, which last year launched its Aon Hewitt Corporate Health Exchange, said the average cost increase in “fully insured” premiums from three companies was 5.1 percent. The three pioneers were Aon (AON), Sears Holdings (SHLD) and Darden Restaurants (DRI).

By comparison, average cost increases for large U.S. employers are projected to be between 6 and 7 percent in 2014, according to Aon Hewitt’s annual cost trend data report.  The lower trend in the exchanges is significant, benefits analysts say, because the rate increase in the exchanges also included reinsurance fees levied on group plans under the Affordable Care Act.

“One of the primary goals of our private exchanges is to bring down the rate of increase in overall health care cost to something that looks more like general inflation,” said Ken Sperling, Aon’s Hewitt’s national exchange leader.

More and more benefits firms like Aon Hewitt rival, Mercer, and insurance companies like Aetna (AET), Cigna (CI), Humana (HUM) UnitedHealth Group (UNH) are developing their own private exchanges.

The exchanges work like those that are operational by states or the federal government under the Affordable Care Act in that they offer consumers more choices plus people who buy coverage are empowered to make choices for their individual needs, benefits consultants say.

Under the health law, millions of Americans are eligible for federal subsidies of about $5,000 to help them buy coverage from health insurance companies that sell individual and small group policies. That subsidized coverage is offered on the government exchanges.

Under the private exchange approach, employers decide on a subsidy or credit that each worker will get to purchase coverage. Then, the employees take to the exchange to select their coverage. The subsidy will vary from employer to employer.

Aon Hewitt has said its exchange turns “selecting health benefits into a retail shopping experience” akin to Amazon.com (AMZN) or Orbitz (OWW).

The Aon Hewit Exchange has grown to include more than 600,000 employees and their family members.

Though it’s still early in the development of private exchanges, consultants are optimistic.

“Our private exchange allows companies to maintain this benefit without having to erode its value or increase what individuals have to pay for it, which has been the pattern for the last decade,” Sperling said. “The second-year premiums in our exchange show early but promising signs that this downward shift is indeed occurring as the exchange helps aligns the interest of employees, employers and insurance companies.”

Source: Forbes Business

 
 
 

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