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Aon Hewitt Survey Reveals Growing Shift in How Employers Intend to Offer Health Care Benefits in the Future

LINCOLNSHIRE, Ill., Feb. 28, 2013 /PRNewswire/ -- In the wake of unprecedented health care market changes and rising health care costs, new survey findings from Aon Hewitt, the global human resources solutions business of Aon plc (NYSE: AON), reveal that the way U.S. employers offer, manage and deliver health care benefits to employees is likely to change significantly in the coming years.

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According to Aon Hewitt, the amount employers spend on health care has increased by 40 percent in the past six years to approximately $8,800 per employee. Over this same period, employee premium and out-of-pocket costs have increased 64 percent to almost $5,000 per year. Aon Hewitt estimates that health care costs for both employers and employees will continue to rise 8 percent to 9 percent per year for the foreseeable future. Worsening population health issues, including obesity, smoking and failure to comply with medications, are expected to significantly contribute to the rapid rise in health care costs.

Despite these challenges, Aon Hewitt's survey of nearly 800 large and mid-size U.S. employers covering more than 7 million employees found that 94 percent of those surveyed will continue to offer health benefits to their employees in the next three-to-five years. However, of those employers, almost two-thirds 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.

"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 & 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."

Adopting "Pay for Performance" Philosophies 
Aon Hewitt's survey found that in the next three-to-five years, almost 40 percent of employers expect to migrate toward a "house money/house rules" approach. Under this model, employers may 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. For example, participants 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. Lastly, some leading-edge employers are working with health plans to incentivize participants to use a small provider network of high quality, cost-efficient providers.

"Over the past decade, employers have reserved an increasing portion of their cash compensation program to pay-for-performance bonus programs," said Zern. "We see similar approaches emerging with health benefits, which reward those employees who actively participate to achieve improved health outcomes."

Growing Interest in Private Health Care Exchanges
While still an emerging trend, private health care exchanges are quickly generating interest among employers. In this model, employers continue to financially support health insurance, but enable employees to choose from multiple plan options and insurance carriers via a competitive, fully insured health insurance marketplace. The exchange model assumes many of the health benefits responsibilities that employers historically manage—including plan design, insurance carrier selection and management, user experience and behind-the-scenes administration.

"Private health care exchanges allow employers to re-create a competitive marketplace for health insurance based on consumer choice, which will encourage insurance companies to drive the system toward greater efficiency," said Jim Winkler, chief innovation officer for the U.S. Health & Benefits practice at Aon Hewitt. "While this option may not be a fit for every employer, it is increasingly attractive to those organizations that want to offer employees health care choice while lowering future cost trends and lessening the administrative burden associated with sponsoring a health plan."

According to Aon Hewitt's survey, about 28 percent plan to move into a private health care exchange over the next three-to-five years. In January 2013, for example, more than 100,000 U.S. employees enrolled in their health benefits through Aon Hewitt's Corporate Health Exchange, the nation's first and only operational fully insured, multi-carrier health care exchange.

Employers' Current and Future Health Strategies


Now

3-5 Years

Manage risk via "House Money House Rules" approach

57%

37%

Move to a private health exchange

2%

28%

Exit health care completely

1%

6%

Maintain traditional trend mitigation approaches

37%

27%

Exiting Health Care Completely
Aon Hewitt's 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 percent of employers said they plan to exit health care completely in the next three-to-five years.

"The allure of exiting completely is strong until you look at the numbers," said Winkler. "Between the Affordable Care Act penalties for failing to offer coverage and the ensuing talent flight risk, most employers believe they need to continue to play a role in employee health, but want a different and better outcome."

"Regardless of the role the employer plays in managing health benefit plans, every organization needs to be committed to maintaining a healthy, high performing workforce that is engaged and ready to work every day," added Zern. "This is increasingly true in the global, mobile workforce of tomorrow."

Aon Hewitt's full Health Care Survey report will be available in March.

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Follow Aon Hewitt on Twitter @AonHewitt

About Aon Hewitt
Aon Hewitt is the global leader in human resource solutions.  The company partners with organizations to solve their most complex benefits, talent and related financial challenges, and improve business performance.  Aon Hewitt designs, implements, communicates and administers a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies.  With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees.  For more information on Aon Hewitt, please visit www.aonhewitt.com.

About Aon
Aon plc (NYSE: AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 62,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United.

Media Contacts:
Maurissa Kanter, 847-442-0952, [email protected] 
Amy Ochalski, 847-771-4225, [email protected]

SOURCE Aon plc

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