The survey shows the vast majority of employers do not view the emerging individual insurance market as a replacement for the employer-based system in place today. Just 6% of employers said they plan to exit health care completely in the next three to five years.
Ninety-four percernt of those surveyed will continue to offer health benefits to their employees in the next three to five years, but nearly two-thirds of these plan to move away from a traditional “managed trend” approach to one that requires participants to take a more active role in their health care planning.
While 57% of employers currently employ a “house money/house rules” approach, Aon found that in the next three to five years, this number is expected to drop 20 percentage points, to 37%. This benefits strategy allows employers to reserve a portion of their health care dollars for those employees who exhibit good health behaviors or who can show measurable progress toward their health goals. Under this model, employees who take health risk questionnaires and biometric screenings may be rewarded in the form of lower premiums or access to broader health coverage. Other employers may waive prescription drug co-pays if an employee demonstrates they are following their doctor’s orders with regard to a chronic condition, and some employers are working with health plans to incentivize participants to use a small provider network of high quality, cost-efficient providers.
Another emerging trend, currently in use by only 2% of employers, is the use of private health care exchanges, which enable employees to choose from multiple plan options and insurance carriers via a competitive, fully insured health insurance marketplace. Employers with this model continue to financially support health insurance, but the exchange assumes many of the health benefits responsibilities that employers typically manage—including plan design, insurance carrier selection and management, user experience and behind-the-scenes administration. According to the survey results, about 28% of employers plan to move into a private health care exchange over the next three to five years.
Following the passing of the Pension Protection and Affordable Care Act (PPACA), unprecedented health care market changes and rising health care costs, Aon Hewitt’s survey findings indicate employers are likely to change their benefits strategies significantly over the next few years. In the past six years, employers have increased the amount they spend on health care by 40%, while employee premium and out-of-pocket costs have increased 64%—to almost $5,000 per year—over the same period.
Aon predicts health care costs for both employers and employees will continue to rise 8% to 9% per year for the foreseeable future. Worsening population health issues—obesity, smoking and failure to comply with medications—are expected to contribute to this rapid rise in health care costs.
“The health care marketplace is becoming increasingly complex. New models of delivery, new approaches to managing health and new compliance requirements are challenging employers to think differently about their role in ‘owning’ health insurance responsibilities for employees and their dependents,” said John Zern, executive vice president and the Americas Health and Benefits practice director for Aon Hewitt. “Employers are staying in the game, but they are taking bold and assertive steps to achieve more effective results—and they are doing so at a faster pace than we’ve seen in prior years.”
Aon Hewitt surveyed nearly 800 large and midsize U.S. employers, covering more than 7 million employees. The full Health Care Survey report will be available in March.