(Bloomberg) — One-third of U.S. employers plan to move their workers' health-care coverage to a private exchange in the next few years, a survey found, following the lead of companies like Walgreen Co. seeking to reduce costs.
While 95 percent of employers said they would continue to offer health care in the next three to five years, 33 percent may use a private exchange to provide the benefit up from 5 percent currently, according to a survey released today by a unit of Aon Plc, a London-based insurance broker.
Traditionally, most large employers are self-insured, meaning they take on the financial risk of their employees' health costs. Under a private exchange, workers are given a subsidy to pick from a limited number of health plans and the insurer takes on the risk.
"Employers are telling us they are losing confidence in their traditional approaches, like vendor changes or employee cost-sharing," which only deliver "incremental" improvement, Jim Winkler, Aon's chief innovation officer for health benefits, said in a telephone interview. "Employers are saying, 'I need to do something different.'"
Health spending in the U.S. is expected to increase more than 6 percent this year and 6.2 percent annually from 2015-2022 as the Patient Protection and Affordable Care Act takes full effect and millions of Americans gain insurance, according to the Centers for Medicare and Medicaid Services.
Walgreen, Sears
Walgreen announced a shift last September to a private exchange run by Aon that serves 18 companies, including Sears Holding Corp. and Darden Restaurants Inc., and 600,000 employees. More than 20 insurers are participating in Aon's exchange this year, Maurissa Kanter, a spokeswoman, said in an e-mail. Most employers have access to five carriers, which each have five plans, giving their workers 25 options to pick from.
"We expect it to grow pretty significantly" in the next few years, Winkler said. "We have a lot of interest in it."
Employers may also be responding to workers who want more choice, said Paul Fronstin, director of health research at the Employee Benefit Research Institute.
