Workforce.com

Health Exchange Rate Begins to Grow

The big potential growth of private health exchanges has lured other major benefits consulting firms into the market.

May 7, 2014

Enrollment in private health insurance exchanges is expected to grow dramatically in the next few years, and if a recent survey of second-year enrollment results from Aon Hewitt’s exchange is an indication, those predictions may prove to be accurate.

The more than 600,000 employees in the Aon Active Health Exchange who signed up in the fall are seeing lower increases in health insurance premiums in 2014 than other U.S. employers, according to the survey, which showed an average cost increase of 5.1 percent compared with 6 to 7 percent for other companies.

“One of the primary goals of our private exchange is to bring down the rate of increase in overall health care cost to something that looks more like general inflation,” said Ken Sperling, Aon Hewitt’s National Exchange strategy leader, in a written statement. “Our private exchange allows companies to maintain this benefit without having to erode its value or increase what individuals have to pay for it, which has been the pattern for the last decade. The second-year premiums in our exchange show early but promising signs that this downward shift is indeed occurring as the exchange helps align the interest of employees, employers and insurance companies.”

The human resources consulting firm launched its exchange in 2012 drawing three large employers: Darden Restaurants Inc., Sears Holdings Corp. and Aon Hewitt’s parent company, Aon. Since then the firm has signed at least 18 new corporate clients with at least 5,000 employees each, including Walgreen Co., which has about 160,000 employees who are eligible for benefits.

The big potential growth of private exchanges has lured other major benefits consulting firms into the market, including Buck Consultants, Mercer and Towers Watson & Co. According to a recent study by Moody’s Investors Service Inc., these firms are investing “significant funds and management resources” to develop their exchanges.

“We expect these firms to build successful exchanges based on their knowledge of employee benefit plans, extensive client relationships and ample financial resources. The investments in private exchanges and the related market opportunity are credit positive for leading benefit consultants and brokers,” according to the report.