Evidence Suggests Private Exchanges Are a Win-Win

The private exchange can also save employers money.

The Aon Active Health Exchange, launched in the fall of 2012 (see “Aon Hewitt Launches Corporate Health Care Exchange”), is a private exchange for large employers that offers fully insured group health plans from multiple insurance companies. More than 150,000 employees and their families from several large employers enrolled in health benefits for the 2013 calendar year.

The average cost increase in fully insured premiums for these three companies returning to the private exchange in 2014 was 5.1%, including the reinsurance fees levied on all group health plans under the Patient Protection and Affordable Care Act. Comparatively, Aon Hewitt’s estimates and other industry reports show that average health care cost increases for large U.S. employers are likely to be approximately 6% to 7% in 2014, before employers make changes in deductibles and copays.

The Aon Active Health Exchange plan designs remained unchanged from 2013 to 2014. During the enrollment season last fall, more than 600,000 employees and their family members enrolled in group health benefits for 2014 through the Aon Active Health Exchange. According to Aon Hewitt’s post-enrollment analysis conducted by an independent third-party, nearly 75% of enrollees felt confident they chose the health plan that offered the best value for them and their family, and 87% liked being able to choose among multiple carriers.

Christie notes one of the big questions employers asked when private health care exchanges were just a concept was, “given our history of trying to communicate and engage employees, is it realistic to expect employees to engage in this model and make smart choices, or will they be overwhelmed?”

“The results clearly show [employees] engage like consumers,” he says. “The evidence supports our original hypothesis that we are not making it more complicated, but making it look more like other things they buy in their lives. It’s more intuitive and less confusing.”

Aon Hewitt’s enrollment data reaffirms that the type of health coverage employees chose for 2014 is not one-size-fits-all. Forty-two percent of employees chose a moderately-priced Silver plan, which was closest to what they had before enrolling in the private exchange. Thirty-one percent elected a Bronze-level plan, choosing leaner coverage in exchange for lower deductions from their paychecks. More than one-quarter of employees chose to purchase richer Gold and Platinum coverage (17% and 10%, respectively).

When choosing a coverage level, most employees said they based their choice on price (32%) and the desire to choose a plan that offered coverage similar to their current plan (23%). Nearly one in five said they chose coverage that they believe offers the best level of medical benefits for them.

When choosing among insurance carriers offered through the private exchange, 36% of employees said they chose the lowest cost carrier for their selected coverage level, 25% chose a carrier with which they had a good past experience, and 22% chose a carrier based on the match between their doctor and the insurance company’s network.

“Employees are asking ‘what is the best fit for my needs?’” Christie says. “The employer stipend is basically a gift card and employees have to make the choice of how to spend it, ‘do I want to pay less premium or less in total out of pocket costs?’”

According to Aon Hewitt, transparency into the total cost of group health benefits and employer subsidies is another positive outcome from the private exchange. Aon Hewitt’s post-enrollment analysis showed three-quarters of employees who enrolled in the Aon Active Health Exchange said they had a good understanding of how they share the cost of group medical coverage with their employer.

When analyzing the election patterns of those individuals who renewed their health benefits through the Aon Active Health Exchange in 2014, 19% switched plan levels, with 12% electing leaner plan designs and 7% electing richer coverage. Fifteen percent switched insurance companies. When asked the reason for switching carriers, 27% of employees said it was because the new insurer’s premium was the best deal, and 26% said their prior carrier increased their premium too much. Only 2% said it was because their doctor left the insurer’s network.

“The distribution stats show people migrated quite a bit from the plans they had been in in the past,” Christie notes. “When they enroll they see greater transparency of what plans cost them and how they can engage differently.” He adds, “They are comparison shopping, and well over 90% are doing it online. They like self-service."

He points out a key takeaway for plan sponsors is, if they wanted to drive this kind of migration in the traditional health benefits approach, they would have to do a lot to try to entice employees to pick the proper option. With the private exchange model, the employer only seeds the subsidy and employees make their own choices. Employers can step away from trying to steer employees into the option the plan sponsor needs them to choose or the option that’s right for them. He adds that plan sponsors are truly insulated from choices—if an employee chooses to buy up, that’s their choice.

Use of Aon Hewitt’s online decision support tools, including health plan comparisons, cost estimators and provider search tools, continues to be significantly higher for employees who enrolled in their benefits through the Aon Active Health Exchange compared to the nine million employees who completed a “traditional” enrollment with Aon Hewitt. Specifically:

• 86% of employees used a comparison tool showing high level design features across plans, compared to just 50% of employees who completed a “traditional” enrollment, and
• 66% used a tool to search for their network doctors and hospitals, compared with 18% usage in traditional plan enrollment.

Sixty-four percent of employees used a new tool introduced on the private exchange for 2014 called “Need Help Deciding?” that walks employees through a step-by-step decision process to select the plan that works best for them based on their ability to handle an unexpected medical expense versus the desire to minimize their payroll deductions.

“As evidence starts to accumulate [about the private exchange model], a lot of question marks get lifted and unknowns are addressed. And, perhaps more sponsors will sign on,” Christie concludes.