A growing number of Americans are no longer getting healthinsurance directly from work as companies quit administeringbenefits, sending about 40 million people to shop for their owncoverage by 2018, a new study estimates.

Instead of picking a companywide health plan, employers areincreasingly giving workers financial support to choose their ownfrom a menu of options. For 2015, 6 million workers selectedcoverage from markets run by private benefits administrators,according to a study from Accenture Plc.

That's double the previous year, when employees of WalgreensBoots Alliance Inc., Sears Holdings Corp. and Darden RestaurantsInc. all had to go shop on their own. By 2018, a quarter ofemployees who get insurance through work will pick a plan throughthe 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 onlinebenefits markets for employers.

The change represents a fundamental shift in theemployer-employee relationship, and also mirrors trends inObamacare, where the U.S. gives people tax credits to help buyinsurance on government markets.

It may also put more of the financial burden of health care onworkers, though it can save employers money and may bolsterearnings at benefits consultants like Towers Watson and Aon Plc.Towers Watson gets about 10 percent of its sales by operating theonline portals for its clients, and exchange revenue grew thefastest among the company's major business lines in the final threemonths of last year.

While privately run insurance exchanges are separate from themarketplaces operated by the U.S. government and some states underObamacare, the same principle applies: individuals choose from avariety of plans with different premiums, copays, deductibles andcoverage options. About 11.7 million people enrolled ingovernment-run marketplaces this year.

Employers can benefit from switching to a private exchangebecause they can set aside a fixed amount of money that workers useto pick an insurance option from companies like UnitedHealth GroupInc., Aetna Inc. or Cigna Corp., among others. While that could begood for relatively healthy employees who can choose cheaper plans,it can also mean that other workers are left covering more of thecosts out of pocket.

Cost Control?

While private exchanges help employers limit what they pay forhealth benefits, it's not yet clear whether they help keephealth-care costs under control, said Rich Birhanzel, managingdirector for Accenture Health Administration Services. If theydon't, workers could be responsible for an increasing share oftheir health-care costs over time.

So far, midsized companies have been the main users of privateexchanges, Birhanzel said. He said he expects larger employers toincreasingly use the portals as well, especially in preparation fora federal levy on high-cost health plans, dubbed the CadillacTax.

That 40 percent tax on costly health benefits, part of theAffordable Care Act, starts in 2018. It'll initially hit familyplans where premiums exceed $27,500 and individual plans costing atleast $10,200.

Premiums for family coverage averaged $16,834 in 2014, up 3percent 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 $6,025premium on average last year.

Aon and Towers Watson are among the largest exchange operators,each covering about 1.2 million people. Aon's exchange is targetedat larger companies. New York-based Towers Watson has drawn themost interest from firms with 3,000 to 10,000 employees, thoughlarger employers are warming up to the idea, according toMoore.

The surge of demand for private exchanges helped lift TowersWatson shares 20 percent in the past year to $132.67 Tuesday, neartheir March 2 closing record of $134.62. London-based Aon has risen20 percent in the past year.

About 1 million people get coverage from exchanges run by Marsh& McLennan Cos.' Mercer unit. Xerox Corp.'s Buck Consultantsunit said about 700,000 individuals got coverage via itsoffering.

Accenture consults with exchange operators and employers, butdoesn't offer its own insurance marketplace, Birhanzel said.

Bargaining Power

Exchanges can give companies more bargaining power withinsurers, according to Towers Watson's Moore. She said companies onher exchange have managed to slow the pace of increases inhealth-care costs.

While the private exchanges can be a way for employers to reducehow much they pay for health care, they can also give workers morechoices, Moore said. Some may opt for reduced benefits, whileothers will pay up for comprehensive coverage.

“Employers have been shifting more and more costs to theiremployees because they can't afford not to,” Moore said. “The thingabout exchanges that really provides value to employees is thatthere's so much choice, so as an employee is faced with a setamount from the employer, they have a number of differentoptions.”

Bloomberg

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