A growing number of organizations now provide health benefits coverage through the individual Medicare plan market.

New research from Aon Hewitt shows that the majority of employers plan to continue sponsoring health benefits for active employees and retirees, but will change the way those benefits are managed and delivered in the coming years.

According to Aon Hewitt’s soon-to-be released Health Care Survey of more than 1,230 employers covering more than 10 million employees, 95 percent of employers say they plan to continue providing health care benefits to active employees in the next three-to-five years. However, a growing number plan to stop aggressively managing costs through vendor management and employee cost-sharing.

Almost 40 percent of organizations surveyed expect to migrate toward a “house money/house rules” approach, which requires employees to take a more active role in their health by offering them a few plan options, plus initiatives designed to improve health and reduce costs. Thirty-three percent say offering group-based health benefits to active employees through a private health exchange will be their preferred approach in the next three-to-five years.   

Employers’ Current and Future Health Strategies for Active Employees

  Now 3-5 Years
Manage risk via “House Money/House Rules” approach 40% 36%
Move to a private health exchange 5% 33%
Exit health care completely 1% 5%
Maintain traditional trend mitigation approaches 52% 21%

According to Aon’s survey of 424 employers covering 3.8 million retirees, 20 percent said they are favoring moving all or a portion of their pre-65 retiree population to the individual market/state exchanges to purchase coverage in the next three-to-five years. Today, just 3 percent of employers do so. Despite having the ability to direct part-time employees to purchase health coverage through the public marketplaces, Aon Hewitt’s survey shows very few employers plan to do so in the near future. Almost two-thirds plan to continue to offer the same level of benefits to part-time employees as they do to full-time employees, with or without an employer subsidy. Just 38 percent plan to offer no benefits to part-time workers in the next three-to-five years.

“Employers will be moving at least some portion of their pre-65 retiree populations to state and Federal exchanges, but they are waiting for these marketplaces to become more robust, competitive and mature,” said John Grosso, leader of Aon Hewitt’s Retiree Health Care Task Force.

According to Aon Hewitt, the number of employers offering subsidized retiree health benefits has slowly declined over the past decade, with just 25 percent of large employers doing so today, compared with approximately 50 percent in 2004.

Of those companies that offer health benefits to post-65 retirees, a growing number of organizations now provide or are seriously considering providing health benefits coverage through the individual Medicare plan market. Aon Hewitt’s annual Retiree Health Care Survey found that 30 percent of companies have already sourced benefits through the individual market most through a multi-carrier private health exchange. Of those companies contemplating future changes to their post-65 retiree strategies, two-thirds are considering this approach.