More Employers to Move Away from Managed Care

Cost of health careAlmost two-thirds of employers plan to move away from traditional managed care benefits and require employees to take a more active role in health care planning, according to a report by Aon Hewitt.

Ninety-four percent of employers surveyed by Aon Hewitt will continue to offer health benefits in the next three-to-five years. John Zern of Aon Hewitt said, “Employers are staying in the game, but they are taking bold…steps to achieve more effective results and they are doing so at a faster pace than we’ve seen in prior years.” The vast majority of employers don’t expect the emerging individual market to replace the employer-based system. Just 6% plan to stop offering health coverage completely in the next three-to-five years. Between the Affordable Care Act’s penalties for failing to offer coverage and the risk of losing top talent, most employers believe they need to continue to play a role in employee health.

In the next three-to-five years, almost 40% of employers plan to reserve a portion of their health care dollars for employees who exhibit good health behavior or make measurable progress toward health goals. For example, employees who take health risk questionnaires and biometric screenings may be rewarded with lower premiums or access to broader health coverage. Other employers may waive prescription drug co-pays for employees who follow doctor’s orders in managing a chronic condition. Some employers are working with health plans to offer incentives to use small networks of high quality and cost-efficient providers.

Over the past decade, employers have reserved more of their cash compensation program to pay-for-performance bonus programs. “We see similar approaches emerging with health benefits that reward employees who actively participate to achieve improved health outcomes,” said Zern.

Private health care exchanges are quickly generating interest among employers. About 28% plan to move into a private health care exchange over the next three-to-five years. With this model, employees choose plan options and carriers. Private health care exchanges re-create a competitive health insurance market based on consumer choice. This will encourage insurance companies to strive for greater efficiency, said Jim Winkler of Aon Hewitt.

Aon Hewitt expects health care costs to rise 8% to 9% per year for the foreseeable future. Worsening health issues including obesity, smoking, and failure to comply with medications will contribute significantly to health care costs. Employer health care spending has increased 40% in the past six years to approximately $8,800 per employee. At the same time, employee premiums and out-of-pocket costs increased 64% to almost $5,000 per year. For more information, visit

Last Updated 05/25/2022

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