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More than 100,000 employees from Sears and Darden Restaurants will use Aon Hewitt’s healthcare exchange to select their health benefits.

Employers using a private exchange use a defined contribution strategy that gives each worker a set amount of credit to choose from among a menu of insurance options.

Liazon’s Bright Choice Exchange is growing at a rate of 100% a year and recently signed deals with Gallagher Benefits Services and Hub International.


Pro Choice

Aon Hewitt’s insurance “exchange” focuses an old idea in a new way. Will it become the next wave in benefits?

By  Mike Patten

[Page 2 of 3]

“We definitely got to the point where companies are just fed up. They want to change the game, and changing the game is really about letting people make the choices instead of forcing the company to make the cost-control decisions. The fact that we get three to five calls a day from insurance brokers who want to learn about this tells me that this is the time. This is the next big thing.”

But giving employees more power to make choices carries its own risk, Klonk says, and doesn’t do anything to change the factors that contribute to rising healthcare costs.

“The upside is you are getting the employee involved in the purchase of their insurance,” he says. “That’s what consumerism is all about. The idea is to actually get the employees thinking about the types of coverage they are buying and how much it actually costs. There’s a lot of upside to it if they are properly educated to make the right decisions. But what you don’t want is to have a bunch of employees go in and pick the least expensive plan because they don’t want to spend any more and then they have a catastrophic claim and they can’t afford it because they didn’t realize that certain things weren’t covered.

“You can’t just draw a line in the sand and say, ‘OK, employees, I’m only going to pay X every year and that’s it, you pay the balance.’ If you don’t improve the health of that group and your claims keep going up, sooner or later those employees are just going to leave because they can’t afford to pay the balance and you end up with a pretty lousy workforce. You have to ask, is there still a mechanism in place to control the increasing cost of care? Are you still doing wellness programs? Are you still doing risk-reduction programs? Otherwise, it’s not sustainable.”

Single-Carrier vs. Multi-Carrier

Cohen says Bright Choices Exchange operates a single-carrier model. Aon Hewitt’s exchange features nine national and regional carriers.

“With a single carrier, you can consolidate the risk,” Cohen says. “One of the challenges with broad-based choice is you get risk selection. Going with a single carrier eliminates the problem of adverse selection because all the risk is consolidated in a single carrier.

“The disadvantage is less choice. It’d be nice to offer more choice to the employees. So what we have done in a number of markets is have multiple, single-carrier exchanges so the employer can decide, ‘I want my employees to use this single-carrier exchange or maybe another single-carrier exchange.’”

Aon Hewitt’s Corporate Exchange offers benefits by nine national and regional carriers, including UnitedHealthcare, Cigna, and Health Care Service Corporation, which operates Blue Cross and Blue Shield plans for 14 million members, including 5 million national account members. Employees can choose from five levels of standardized medical plans, four levels of dental care and three levels of vision care. The benefits package for each of these levels is standardized across carriers, and there are only four moving pieces between the levels—deductible, coinsurance percentage, out-of-pocket maximum and pharmacy coverage. All other design provisions have been equalized to make it easier for employees to compare.

Ken Sperling, Aon Hewitt’s national health exchange strategy leader, says its exchange is an option for employers looking to reduce cost, transfer risk to insurers, encourage employees to make smarter healthcare choices and create a more sustainable healthcare benefit program.

Sperling says competition between insurers in the Aon Hewitt marketplace should result in more affordable coverage as insurance companies are forced to compete for business. And he says the exchange will make insurance costs more transparent for employees.

“Since 2006, large-employer costs for healthcare have gone up 40% while employee costs have gone up 82%,” Sperling says. “Our corporate exchange seeks to reverse this trend by incenting insurance companies to compete on price. In every consumer market where there is strong competition, prices go down as a result. The exchange creates a competitive and transparent environment for health insurance so employers can maintain their commitment to health benefits without further shifting costs to employees.”

 

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