Aon Hewitt Scores 15 Big Private-Exchange Clients

It could be the validation that this emerging mode of delivering employee health benefits needs to really take off.

While interest in private health-insurance exchanges for active employees has recently been percolating more heatedly among large companies, an announcement today represents the strongest validation to date of the private-exchange concept.

Human-resources consulting firm Aon Hewitt said that it’s signed 15 new corporate clients, all with at least 5,000 employees, to provide employee health benefits through its private exchange in 2014. Only one of the companies was identified, but it was a whopper: Walgreens, which has about 160,000 benefits-eligible employees. 

The new customers will join the exchange’s initial, 2013 users – Sears Holdings, Darden Restaurants and Aon Hewitt parent Aon plc, each of which chose to stay on for a second year.

“Everything’s been moving pretty fast already with private exchanges, but this is a very big deal,” says Ed Kaplan, senior vice president and national health practice leader at another human-capital consulting firm, The Segal Company, that does not offer a private exchange. 

Exchanges being run by Aon Hewitt competitors Towers Watson, Mercer and Buck Consultants – none of which has yet said it will have more than five corporate clients in 2014 – allow customers to offer either self-insured or fully insured health plans through the exchanges. Outside the exchange environment large companies generally self insure, because paying claims directly is less expensive than using an insurance company to do that, provided the employer has enough workers to adequately spread its risk.

But although Aon Hewitt accommodates fully insured plans only, it still insists that its model will save money for most customers. Apparently there are at least 18 companies that agree, although Walgreens, because of its extreme size, may be an outlier. 

“I think there’s been a big push to get a large entity like us involved in this exchange, and that’s probably reflected in the design” of health plans offered in the exchange, says Mark Englizian, the pharmacy giant’s vice president of compensation and benefits.

Walgreens size also allows it to take maximum advantage of Aon Hewitt’s strategy of dividing up the country into 21 geographic regions where carriers compete to get on the roster of those available to customers’ employees, which differs from region to region.

“We happen to be large enough that our risk is spread pretty well across all the 21 regions,” says Tom Sondergeld, senior director of health and well-being at Walgreens. “That allows the insurance carriers to offer very competitive rates.”

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