A growing number of Americans are no longer getting health insurance directly from work as companies quit administering benefits, sending about 40 million people to shop for their own coverage by 2018, a new study estimates.
Instead of picking a companywide health plan, employers are increasingly giving workers financial support to choose their own from a menu of options. For 2015, 6 million workers selected coverage from markets run by private benefits administrators, according to a study from Accenture.
That’s double the previous year, when employees of Walgreens Boots Alliance Inc., Sears Holdings Corp. and Darden Restaurants Inc. all had to go shop on their own. By 2018, a quarter of employees who get insurance through work will pick a plan through the private markets, according to Accenture.
“It’s clearly the way health care is heading,” said Jean Moore, a managing director at Towers Watson & Co., which runs online benefits markets for employers.
The change represents a fundamental shift in the employer- employee relationship, and also mirrors trends in President Obama’s health-care law, also known as Obamacare, where the government gives people tax credits to help buy insurance on government markets.
It may also put more of the financial burden of health care on workers, though it can save employers money and may bolster earnings at benefits consultants like Towers Watson and Aon. Towers Watson gets about 10 percent of its sales by operating the online portals for its clients, and exchange revenue grew the fastest among the company’s major business lines in the final three months of last year.
While privately run insurance exchanges are separate from the marketplaces operated by the U.S. government and some states under the law, the same principle applies: individuals choose from a variety of plans with different premiums, copays, deductibles and coverage options. About 11.7 million people enrolled in government-run marketplaces this year.
Employers can benefit from switching to a private exchange because they can set aside a fixed amount of money that workers use to pick an insurance option from companies like UnitedHealth Group, Aetna or Cigna, among others. While that could be good for relatively healthy employees who can choose cheaper plans, it can also mean that other workers are left covering more of the costs out of pocket.
While private exchanges help employers limit what they pay for health benefits, it’s not yet clear whether they help keep health-care costs under control, said Rich Birhanzel, managing director for Accenture Health Administration Services. If they don’t, workers could be responsible for an increasing share of their health-care costs over time.
So far, midsized companies have been the main users of private exchanges, Birhanzel said. He said he expects larger employers to increasingly use the portals as well, especially in preparation for a federal levy on high-cost health plans, dubbed the Cadillac Tax.
That 40 percent tax on costly health benefits, part of the Affordable Care Act, starts in 2018. It’ll initially hit family plans where premiums exceed $27,500 and individual plans costing at least $10,200.
Premiums for family coverage averaged $16,834 in 2014, up 3 percent from a year earlier and compared with $5,791 in 1999, according to the Kaiser Family Foundation. Workers picked up about $4,823 of the tab. A single person paid $1,081 of the $6,025 premium on average last year.
Aon and Towers Watson are among the largest exchange operators, each covering about 1.2 million. Aon’s exchange is targeted at larger companies. New York-based Towers Watson works mainly for firms with 3,000 to 10,000 employees, according to Moore.
The surge of demand for private exchanges helped lift Towers Watson shares 20 percent in the past year to $132.20 Monday, near their March 2 record of $134.62. London-based Aon has risen 21 percent in the past year.
About 1 million people get coverage from exchanges run by Marsh & McLennan Cos.’ Mercer unit. Xerox Corp.’s Buck Consultants unit said about 700,000 individuals got coverage via its offering.
Accenture consults with exchange operators and employers, but doesn’t offer its own insurance marketplace, Birhanzel said.
Exchanges can give companies more bargaining power with insurers, according to Towers Watson’s Moore. She said companies on her exchange have managed to slow the pace of increases in health-care costs.
While the private exchanges can be a way for employers to reduce how much they pay for health care, they can also give workers more choices, Moore said. Some may opt for reduced benefits, while others will pay up for comprehensive coverage.
“Employers have been shifting more and more costs to their employees because they can’t afford not to,” Moore said. “The thing about exchanges that really provides value to employees is that there’s so much choice, so as an employee is faced with a set amount from the employer, they have a number of different options.”
