Employers to Change Health Benefits Delivery

The latest release of Aon Hewitt’s Health Care Survey finds that 95% of employers 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 selection and employee cost sharing.

Almost 40% of organizations expect to migrate toward a house money/house rules approach, which requires employees to take a more active role in their health by offering them a few plan options, plus initiatives designed to improve health and reduce costs. Thirty-three percent of employers reached for the survey say 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.

“Traditional cost management tactics do not address foundational issues in health care, including worsening population health and misaligned provider payment methodologies,” says Jim Winkler, Aon Hewitt’s chief innovation officer for health and benefits, based in Lincolnshire, Illinois. “Employers remain committed to providing health benefits, but recognize the need for new approaches that fix those problems.”

Despite having the ability to direct part-time employees to purchase health coverage through the public marketplaces, the 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% plan to offer no benefits to part-time workers in the next three to five years.

Pre-65 Retirees

The survey of 424 employers, covering 3.8 million workers and retirees, also finds that 20% of employers favor moving all or a portion of their pre-65 retiree population to the individual market or state exchanges to purchase coverage in the next three to five years. Today, just 3% of employers do so.

“Employers will be moving at least some portion of their pre-65 retiree populations to state and federal exchanges, but they are waiting for these marketplaces to become more robust, competitive and mature,” says John Grosso, leader of Aon Hewitt’s Retiree Health Care Task Force. “This movement will be slow and methodical, as the public marketplaces evolve and as employers understand the implications of the 2018 excise tax, which will only impact group-based health insurance plans.”

Post-65 Retirees

Research by Aon Hewitt shows that the number of employers offering subsidized retiree health benefits has slowly declined over the past decade, with just 25% of large employers doing so today, compared with approximately 50% 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 finds that 30% 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,” says Grosso.

Winkler adds, “The competitive nature of the individual Medicare market has resulted in more moderate year-over-year rate increases than what employers have experienced on their own. As health insurers regain control for creating a competitive market that is accountable to the consumers within it, we expect to see similar cost moderation across the system, including the new competitive markets emerging for pre-65 retirees and active employees.”

Aon Hewitt is a global provider of talent, retirement and health solutions.