Is a health exchange right for your organization? John Caldarella breaks down the key components in the Active Health Exchange at Aon to help you decide.
How Private Health Exchanges Work
Healthcare has undergone dramatic change over the past few decades. Employer-sponsored healthcare, dental and vision coverage were the first benefits offered to many employees in the 1950s and ’60s, during which time the Medicare and Medicaid programs were also created. HMOs gained traction in the ’70s followed by broad-based national networks in the late ’80s and early ’90s – both were market responses to soaring healthcare inflation rates. Consumer-driven health plans emerged in the early 2000s and we are now in the post Affordable Care Act era, a hotly debated law meant to once again address the skyrocketing cost of healthcare.
According to John Caldarella, National Practice Leader, Active Health Exchange at Aon, today’s healthcare landscape is an amalgam of these eras. Many of yesterday’s ideas are being recycled with a modern twist. For example, today’s Accountable Care Organizations are being constructed with principles used to launch HMOs or establish network-based coverage. According to Caldarella, choice is once again in vogue and translates to value for both employers and employees. Providing competitive choice is the core tenet of the private health exchange market.
Taking the Leap
Aon has been in the private health exchange arena for six years and, during that time, has embraced the intricacies of healthcare’s evolution
“Like any disruptive, innovative solution, you have to learn from it and evolve,” says Caldarella. “Within today’s dynamic healthcare marketplace, if you have it ‘right’ one day, markets will move, new dimensions or players will emerge, and you have to adapt to stay relevant.”
Caldarella says that one of the key differentiators for the Aon Active Health Exchange is found in its value proposition: promoting carrier competition, controlling costs, improving member satisfaction and unlocking innovation. Promoting competition is critical because it drives the other three values.
When you think about everything an employer must do for the health plan, outside of an exchange, the list is massive, he says. Universally, they look at plan designs, contribution strategies, adding some level of choice, performance and rebidding the plans from one carrier to another, wellbeing- and incentive-based programs, clinical programs, add-in services, navigation tools and so on.
If employers were part of an exchange, then the “exchange is an integration point because we do all of those things simultaneously,” he adds.
In Aon’s exchange, clients have access to a broad panel of regional and national carriers offering a menu of standardized plans and multiple coverage tiers. By offering employees this level of head-to-head choice, Aon drives carriers to compete with their “best cards.” Aon establishes a level playing field where carriers need to keep their “pencils sharp” to retain and attract members. The business is effectively put out to bid every year, for every member, in every geography and at every benefit level.
“We establish and manage the competitive rules of the game, but the way carriers play varies from year to year as they assess their competitive positions,” says Caldarella. “As a result, we can control costs better and improve member satisfaction by offering legitimate choices between plan designs and carriers—we unlock innovation because carriers have to figure out a way to win.”
One significant result of this competition has been the level at which carriers play. Caldarella says a common misconception about pricing in a private health exchange is that carriers would strip down their service or program offerings to keep price tags low. But the opposite is true for Aon’s carriers.
“Our carriers are almost universally playing their highest service-level models to attract and retain members,” he says. “They know that next year, members could choose other carriers, so competition remains fierce.”
Another bonus of Aon’s private health exchange is its risk-adjustment mechanism. Aon’s exchange evenly distributes good and bad risks so that one carrier doesn’t have the upper (or lower) hand. Instead of one carrier shouldering the burden of high-risk populations and pricing their services conservatively, their risk is dispersed across all carriers in the exchange. The same goes for carriers with good risks. This ensures that pricing in the exchange is stable.
Details of the Exchange
Caldarella says the Aon Active Health Exchange operates as a bundled approach with three core components: benefits administration, consumer experience and structured procurement. When employers choose Aon’s exchange, they provide each of their employees with the choice of (at least) four carriers and four benefit options.
This comes into play nicely when you look at what’s happening broadly in the workforce— multi-generational colleagues, flexible work arrangements and advances in tech all play into a workforce that has grown to expect personalized options in both their personal and professional lives.
“There are five generations working together for the first time,” says Caldarella. “Healthcare coverage can’t be one-size-fits-all—companies with broad demographic or geographic makeup require choice to meet the diverse needs of all their employees.”
While all signs point to employees enjoying benefit autonomy, there are some companies that remain hesitant to relinquish control.
Caldarella says a common concern he’s heard is that “‘employees can’t handle too much choice and complexity. If I use an exchange, I’ll have unhappy workers.’”
To help quell these unfounded notions, Aon deploys contemporary consumer choice tools to enable good decision-making. Aon’s satisfaction data confirm that the tools are working (maintaining 90 percent satisfaction levels). “One of the lessons we learned during the Flexible Benefits Era was that if you provided meaningful choices, supported by personalized communications, employees could make confident choices about their benefits,” says Caldarella.
He adds that much of this satisfaction stems from the nature of the exchange. For example, outside of an exchange, if an employer decides to increase the healthcare deductible or replace the current carrier with a different one, the employee may see only the takeaways. In the exchange dynamic, however, if premiums increase for their current plan and carrier, the employee can compare plans and carriers and make the selection that best meets their individual facts and circumstances.
“In the end, employees like the choice of both plan and carrier and our decision-support tools help them feel much more confident in their selections,” says Caldarella. “Our data show they are making good decisions.”
For more insight into the topics discussed in this piece, please reach out to your Aon representative or firstname.lastname@example.org.