Borrowing a page from health care reform, global insurance and consulting firm Aon Hewitt last week launched Corporate Exchange, an employer version of the consumer-oriented health insurance exchanges, or marketplaces, set to open in each of the states in 2014 under the Affordable Care Act.
Iconic retailer Sears, which also owns Kmart, and Darden Restaurants, which operates Olive Garden, Red Lobster and other dining establishments, were among the first to sign on to Aon Hewitt's twist on traditional employer health plans, according to the Wall Street Journal.
Beginning with open enrollment this month, some 90,000 Sears employees and about 45,000 Darden workers will be given lump sums and allowed to choose their own medical plan from up to nine health insurance carriers, in what Aon Hewitt calls "a retail shopping experience." Blue Cross/Blue Shield, Cigna and UnitedHealthcare are among the health insurance companies participating in Corporate Exchange.
In a recent telephone chat, Aon Hewitt strategy leader Ken Sperling acknowledged a debt to health care reform for helping pave the way for the employer version.
"We're not trying to compete with the state exchanges; we are trying to create a model that kind of mirrors what the state exchanges are trying to accomplish for a segment of the marketplace that is not able to take advantage of it," he says.
Sperling explained that large employers fall into two camps these days.
Those that "self-insure," meaning they set aside funds and pay employee health care bills directly, find it increasingly difficult to budget, given rising health care costs and a workforce of aging baby boomers.
On the other hand, employers that still offer traditional group insurance typically sign on with the lowest bidder to keep costs down. "When you consider that what they're doing is giving their business to the people who pay the doctors and hospitals the least amount of money, it doesn't necessarily speak to quality," Sperling notes. "Those providers will make up in volume what they lose in cost, which is exactly what has happened."
Armed with its own surveys showing increasing employer dissatisfaction with health care, Aon Hewitt spent 18 months designing Corporate Exchange. It gives employees more choices and helps employers lower their costs by moving to a defined contribution plan that: a.) helps with budgeting; and b.) shifts some of the risk back onto insurers.
"This is a grand experiment because we have to create a triple win here," Sperling admits. "We have to create the business case that makes it work for employers, (offer a) broad choice of plans and companies so employees have more control over what kinds of plans they choose from, and we have to make it work for the carriers. If the insurance companies look at this model and decide they're either going to enroll nobody or they're going to lose their shirt, they're not going to play."
As I recently blogged, employers are scrambling to find new approaches to affordable health insurance for their employees. If the numbers add up, employer-based exchanges like Aon Hewitt's Corporate Exchange and WellPoint's forthcoming Anthem Health Marketplace are positioned to prove popular.
The great unknowns are: How much will employers allot workers to purchase health insurance through these exchanges, and will it be enough to match current coverage levels?
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