Aon Hewitt is rolling out a health insurance exchange that will enable employers to offer workers an array of plans from participating insurers.
By using the exchange, employers will be relieved of the time and hassle of selecting health insurers and administering their plans while employees will have a greater choice of plans. The first policies will be effective Jan. 1, 2013.
“There is a lot of work employers no longer will have to do,” said Mike Christie, senior vice president-exchanges at Aon Hewitt in Lincolnshire, Ill.
Employees will be able to choose from five plans, including consumer-driven health plans. Nine insurers, including UnitedHealthcare Inc., Cigna Corp. and Health Care Service Corp., which operates Blue Cross/Blue Shield plans, will provide the coverage.
Initially, premiums will be based on an employer's claims experience.
Aon Hewitt expects that more than 100,000 employees — including U.S. employees of parent company Aon P.L.C., Hoffman Estates, Ill.-based retailer Sears Holdings Corp. and Orlando, Fla.-based chain Darden Restaurants Inc. — this fall will select and enroll in plans offered through the exchange.
The exchange model deploys a defined contribution approach in which employers agree to provide a fixed premium contribution, with employees paying more or less depending on the level of coverage they choose.
The role of the employer, Aon Hewitt executives note, will be basic: deciding how much of the premium it will pay for each option, with insurers handling processing of claims.
Aon Hewitt, which will assist employees with questions they have about the plans offered, will be compensated by fees and commissions paid by insurers that participate in the program.
While the health care coverage will be offered through an exchange, employers still will be plan sponsors. As a result, their premium contributions will be tax-deductible, while employees will be able to pay their share of the premium on a pretax basis.
Health care observers say the exchange model is appealing, especially for smaller companies that either don't offer coverage or want to expand choices offered to employees but don't have the resources to do so.
“There are employers that want to focus on their core business and do not want to take on the challenges of offering and administering health care plans,” said Michael Thompson, a principal with PricewaterhouseCoopers L.L.P. in New York.
On the other hand, a significant percentage of employers, especially larger organizations, want to offer their own individually designed plans as integral to their strategy of attracting and retaining employees, Mr. Thompson said.
Others note that employers, especially those that self-fund their health care plans, will have to analyze whether the exchange approach is cost-effective, noting that premium rates charged by participating insurers will include a margin for their profit.
“Employers will have to evaluate for themselves whether this will save them money,” said Steve Raetzman, a partner with Mercer L.L.C. in Washington.
Several organizations, including Aon Hewitt, Extend Health, which Towers Watson & Co. purchased this year, and Xerox Corp. unit Affiliated Computer Services Inc., offer retiree health care coverage through a network of insurers. Many plans offered in those exchanges supplement coverage provided in the federal Medicare programs.