“We had postulated that private exchanges would accelerate the movement toward consumerism in employer-provided health care, where people have more to say about the cost of care they receive, and these results validate that to some degree,” says Michael Thompson, a principal in the health-care practice at PricewaterhouseCoopers. “Overall, these are encouraging results. We’re seeing a lot of people right-sizing their coverage when they fully understand the trade-off between the cost of coverage and what they’re getting.”
By David McCann
Exchange participants can either ‘buy up’ or ‘buy down’ compared with their previous coverage, but most do the latter rather than opt for better insurance.
Judging by newly released data on health-care choices made by employees at companies offering insurance through private exchanges, most people would rather save money than have better insurance.
Aon Hewitt, one of four large human-capital consulting firms that offer private exchanges for active employees, on Thursday revealed the 2014 selections by employees of the 18 corporate customers of its exchange. More than 600,000 of those companies’ employees and their family members are covered this year by insurance available through the exchange.
Among the four pricing tiers (designated as platinum, gold, silver and bronze) in Aon Hewitt’s exchange, 73 percent chose one of the two lowest-priced ones (see chart, “Going for the Silver”).
For both Aon Hewitt and some of the other exchange vendors, the metallic levels are generally defined the same as they are by the public exchanges, created under the Affordable Care Act, which started enrolling people this year.
A “silver” plan, for example, has an “actuarial value” of 70 percent (plus or minus a couple of percentage points), which means the plan pays for that share of health-care costs while enrollees pay the rest through some combination of deductibles, copayments and coinsurance. The actuarial values of bronze, gold and platinum plans are 60 percent, 80 percent and 90 percent, respectively. A plan with a value of, say, 85 percent might be called “gold-plus.”
Generally, the more employees pay for deductibles, copays and coinsurince, the less comes out of their paychecks for the insurance itself. An employee choosing a bronze plan, say, may be making a bet that he will stay healthy and thereby avoid the costs of deductibles and copays.
“We had postulated that private exchanges would accelerate the movement toward consumerism in employer-provided health care, where people have more to say about the cost of care they receive, and these results validate that to some degree,” says Michael Thompson, a principal in the health-care practice at PricewaterhouseCoopers. “Overall, these are encouraging results. We’re seeing a lot of people right-sizing their coverage when they fully understand the trade-off between the cost of coverage and what they’re getting.”
(PwC is part of the Private Exchange Evaluation Collaborative, a broad-based group that aims to provide unbiased information and insight on the private-exchange industry. PwC does not offer an exchange of its own.)
Two of the three initial clients that Aon Hewitt signed up for its exchange for 2013, Darden Restaurants and Sears Holdings (the third was the consulting firm itself), employ large numbers of low-wage workers. Among large companies, they’re of the type that was thought at first to be the most likely source of clients for private exchanges.
