Health Benefit Trends
According to the Kaiser Family Foundation, employer sponsored insurance covers about 149 million nonelderly people. The Kaiser Family Foundation and the Health Research & Educational Trust conduct an annual survey of nonfederal private and public employers with three or more workers; results from the 2013 Employer Health Benefits Survey, showed that:
- The average annual premiums in 2013 for employer-sponsored health insurance are $5,884 for single coverage and $16,351 for family coverage.
- Over the past ten years, the average premium for family coverage has increased by 80% from $9,068 in 2003.
- Average premiums tend to be high for larger firms (with 200+ workers).
- Among workers with an annual deductible, the average deductible for single coverage was $1,135, an increase from the 2008 average annual deductible of $735.
- 28% of large firms offer health benefits to retired workers.
- “9% of large firms (200 or more employees), including 29% of firms with 5,000 or more employees, reported that they are considering offering health benefits through a private exchange in the future.”
A Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care, which surveyed 583 larger companies, found that over the next five years, 24% of employers said they were “likely” to provide access to a private or corporate health exchange where employees select from various options; 45% said they were neutral, and 30% said that such a move was unlikely. Private exchanges from companies like Aon Hewitt and Extend Health are on the rise. These new exchanges are developing different models; so companies looking to utilize an exchange for benefits should be mindful of the differences, including:
- Defined Contribution models
- Single carrier versus multi carrier exchanges
- Types of benefits offered
- Fully-insured versus self-insured
Extend Health is a private Medicare exchange that serves Medicare-eligible retirees and their corporate sponsors. The exchange offers Medicare plans from health insurers including UnitedHealthcare, Aetna, Cigna, Humana, and more than 15 independent Blue Cross/Blue Shield plans. Towers Watson’s managing director of exchange solutions, Bryce Williams, the founder of Extend Health, says so far “Extend Health has enrolled nearly 500,000 retirees from 300 companies in its Medicare insurance exchange, which is the country’s largest.” According to the Wall Street Journal, “Extend Health said nearly 50 companies in the Fortune 500 have become clients, including Caterpillar and DuPont Co.” IBM, International Business Machines Corp, is one company that plans to end a company-sponsored health plan and move retirees to the Extend Health private exchange. The move, which will affect about 110,000 retirees who are eligible for Medicare, will allow IBM to offer benefits not now available under the group plans and possibly at lower cost. IBM will make annual contributions to health-retirement accounts and retirees would use the money to buy Medicare Advantage or supplemental Medigap policies though a private Medicare exchange. Time Warner, is another company which intends to move retired workers from a company-administered health plan to the private exchange beginning January 1. Other companies which will be using the Extend Health exchange include CSX and Whirlpool. Aon Hewitt developed a Corporate Health Exchange where multiple carriers offer plans. Employers establish their contribution toward employee health care and employees can select coverage from multiple carriers and plans. The company announced in September that 18 large employers, including Walgreens (affecting approximately 160,000 current employees) and 2013 participants Sears Holdings Corp. and Darden Restaurants, will offer health benefits this fall through the Aaon Hewitt Corporate Health Exchange. There will be five times the number of employers participating in the 2014 exchange as in 2013 and more than 300,000 employees enrolled. The Aon Hewitt Corporate Health Exchange will cover 600,000 U.S. employees and their families in 2014. More companies moving employees and retirees to exchanges Home Depot plans to move part-time workers to new public health insurance exchanges, affecting around 20,000 part-time workers who previously had chosen the limited liability medical plan the company offered. Trader Joes will no longer provide health coverage for employees with fewer than 30 hours per week; these employees will receive $500 to help them purchase insurance. For struggling organizations, benefit exchanges are becoming part of the solution to poor financials AMR Corporation, American Airlines parent company, is considering making the move to an exchange as the company works through bankruptcy and reorganization. Detroit, the largest U.S. city to seek bankruptcy protection, has proposed changes to current health benefits. Detroit has more than 23,500 retired city workers, more than double the city’s current payroll. The City is considering offering retirees under age 65, who belong to the General Retirement System or the Police and Fire Retirement System, a $125 a month stipend; while those over 65, who now receive city-paid health insurance to supplement their Medicare coverage, would only receive Medicare. Increasing consumer engagement is another trend on the rise When employees are offered a defined-contribution plan and allowed to shop for insurance through a private health exchange, they often opt for coverage with lower monthly premiums and higher deductibles. A recent Reuters article, ‘OUR MONEY -Bargain-hunting may lead to fewer health insurance choices,’ stated that “On Aon Hewitt’s private exchange for large employers, 46 percent of roughly 100,000 people enrolled last year bought less coverage than they had previously. Over the past five years, 80 percent of customers on Liazon’s exchange for small-business employees changed their coverage, with 90 percent of those choosing less-expensive plans.” “It’s about people picking what they need,” says Liazon co-founder Alan Cohen. “Companies overbuy dramatically in the area of health insurance. You quickly realize that it’s inefficient to force people into one plan.” A study released by Columbia Business School predicts “the average consumer on the exchanges will lose more than $611 a year by failing to pick the most effective option for their needs, and that the government may lose $9 billion subsidizing poor choices.” However, other research indicates that individuals choosing lower levels of coverage may actually be choosing the option that best meets their needs. Liazon, which conducted a detailed analysis of one year of claims data for one of its large clients, found that 75 percent of people were in the best plan for them. As companies look for ways to control healthcare costs, public and private exchanges are becoming an attractive option that increases consumer engagement and may be attractive options for both employers looking to control healthcare costs and employees looking for more control.