Aon Hewitt isn't letting health care reform dictate its business model. If anything, it's the other way around. In addition to publishing an influential report on the implications of health reform for large employers, CEO Kristi Savacool has been to the White House several times in recent months to discuss the company's retiree health care exchange and upcoming active employee exchange model.

"We have been on the front line," says Savacool, "really influencing the development of health care reform, influencing our clients with respect to how they put their own health care strategies together."

The former Hewitt Associates exec shares how joining forces with Aon has enhanced that capability, and discusses the health care landscape, why wellness programs are more important than ever, and the future of the profession.

Have you had to make adjustments around PPACA?

We've adjusted with respect to ensuring that we have solutions that enable health care reform and help employers respond to it, as well as shape a health care strategy that serves their business interests with or without health care reform.

We have a database of employers nationwide that shows that the cost of health care per person is crossing over $10,000 a year. So when you think about the kinds of solutions that are needed to both change that cost curve as well as most fundamentally improve the wellness and health and productivity of their employees that becomes incredibly important.

From the standpoint of health care design, administration options moving from more of a group-based set of solutions to an individual-based set of products in the form of the health care exchanges; those are adjustments in the form of solution offerings. But it really isn't just in response to health care reform. It's really important to know that we're actually influencing those directions as they come forward. It's really exceeding our expectations in terms of the opportunities to serve clients better and develop solutions that are holistic.

I'll give you an example. In the health care and benefits environment, from advising to designing to broking an insurance solution to administering to the data analytics in terms of how health care is being consumed and the impact on the outcomes that an employer wants to see, we are the only company that can bundle all of that together and provide everything from end to end. We're seeing tremendous demand in the health and benefits space for the combination of capabilities that cut across that spectrum of advice to delivery.

So it's going very well. We worked our way quickly through the integration, all the kinds of tactical things that you need to do to bring two companies together. This really is the year to leverage all of those assets on behalf of our clients and accelerate growth.


Can you give a little bit of background on your health care exchange and how it's going?

Let me draw a parallel for you to the retirement pension market. If you compare 1980 to 2005 and you look at retirement plan participants - I'm going to contrast this to health in a minute - 61% of participants were in active retirement and DB plans and 39% were in other DC plans, such as thrift savings plans and profit sharing plans. And none were in 401(k) plans. Today, 62% are in 401(k) plans, 11% in other DC and only 28% in DB plans. So essentially moving from a group-based or a company-sponsored plan to a more individual level of responsibility.

When you look at that trend and you look at health care there's a parallel track happening. This is really parallel to the DB-to-DC transition. [See chart on p. 29] I draw the parallel to health care, if you look at 1988, 73% of enrollments were in conventional plans, about 16% in HMOs and only 11% in PPOs. Today (2011), only 1% are in conventional plans, 17% in HMO, 55% in PPOs and 17% in quazi-defined-contribution kinds of plans.

So when you think about where exchanges fit in this and you look at the transition to an individual level of responsibility and moving from a self insured to an insured marketplace, you get a trend toward the utilization of exchanges, both for retirees and for active employees.

We entered the business in the retiree exchange business and have had great success. In fact, the demand this year, the rate of growth and the utilization of exchanges to both advise and then place the health insurance, is growing pretty significantly. When we look at our large corporate employers - we have about 562 that we surveyed recently - what we found is that 94% of those employers are committed to offering and financially supporting health benefit coverage for their workforce in some form.

To the question I often get asked, "Are employers bailing out?" The answer is no. They're going to change the solution set that provides for health care coverage, but they are unlikely to exit. We're in the process of building a corporate exchange for those who can't access the state exchanges because they're too big - they have more than 1,000 employees. The interest from employers is high. We think it's in their best interest and we're working with the insurance markets to define that. It really is a situation where it is strategically important both for retirees and active plans. We are working on the active plan for January 2013.


Are you thinking about competing with state exchanges in the future?

When you look at a health care exchange such as the retiree exchange, that has a retail component to it as well. So when you think of particularly small employers there isn't any reason that they can't avail themselves of the exchange markets that are available in the industry.

It doesn't compete with the state exchanges. It really is complimentary. In fact, we spent time at the White House meeting with members of President Obama's staff on health care reform and the exchanges for state governments and U.S. companies; I think I've been there three times in the last six months to talk with them about that. Because they really are complimentary and as the exchange network develops everyone from very large, jumbo-level employers to small businesses will be able to afford themselves of the opportunity to participate in that.

It's a more cost effective, very efficient market, so I think from the standpoint of yielding improvement in the cost of health care, access to it as well as limiting the financial exposure that companies small and large alike have, it's an incredibly efficient and important market that's developing. And I think that's why we're seeing the level of intensity around it.


How are you envisioning the structure?

You would have a set of options that might be in a metallic kind of structure: bronze, platinum, gold, etc., that have different attributes. Think of grouping your health care plans into different selections that are grouped based on carrier, design and price point. So you as a prospective health care insurance consumer can make choices: Carrier A through D, you can choose a design that works for you that has different coverage options, different deductible options, and then there's a price point associated with each of those. So you would contact the exchange, talk through your health care needs. You would get advice in the form of what the different options were and then you would make a choice around that. Your employer would contribute, to a certain level, a subsidy and then you would pay the difference to the extent that there was one.

It's important to note that voluntary benefits would still be an incredibly important compliment. We have a significant strategy around that. Many employers are really extending and expanding the options and the types of voluntary benefits that they want to make available to their employees - and they're dong it, one, because they want their employees to have good outcomes in terms of health and other things, but they're also seeking to find ways to differentiate their benefit offerings without increasing their financial exposure.


What is your view of the overall landscape as it pertains to all of the stakeholders: providers, carriers, health plans, etc.?

Here's what I would say. Health as a category is growing dramatically and as the market shifts from a traditional employer-sponsored set of health plans and the associated carrier and broker relationships, whether you're a service provider or you're a broker or you're a carrier or you're a consumer in the form of a company or an individual employee or a retiree, that landscape is going to change.

We collaborate all the time on an ongoing basis with all of those stakeholders. Because in the end we want to lead and shape an efficient market that serves the interest of all the stakeholders. All of it will change. The composition of our services, the composition of our relationships. As they will for carriers and brokers and companies alike. So you're going to see lots of ups and downs and friction here or there or opportunity here or there as this market shapes itself.

The approach we're taking is we're extremely collaborative with all of the other stakeholders because in the end if we don't produce an efficient market - and it takes all of the parties to do that - in the end the consumer or the company won't be served. And that's the only way that we grow or perform is to serve our clients.

So this isn't about only Aon Hewitt's best interests. We are really acting as a steward of a broader market development, broader industry that's in development.


How are you investing in wellness as an avenue toward increased cost containment?

We are investing heavily in that, and regardless of size or geography employers can achieve a really strong ROI on wellness. We help design programs that do that. We help communicate them and what we've seen is a direct and positive impact on both medical expenses and absenteeism rates. In the end that drives cost and productivity.

The work that we do around engagement of employees in their health care and their family's engagement in their own healthy behaviors, companies are leaning toward not only incentives that reward healthy behavior but [also] penalizing unhealthy behaviors. House money, house rules.

You're seeing more and more employers that simply can't absorb the endless rate of increase of health care costs as a function of choices that employees are making in their health. So they're investing heavily in that.

To give you some data, we did a 2011 health care survey on health risk questionnaires and assessments and biometric screenings. Those are two very popular programs and what we found is 49% of employers offer employees an incentive to participate in a health risk questionnaire or assessment and 33% do the same with biometric screening. And we're seeing more and more do incentives as well as penalties.

Thirty-one percent of the organizations are using incentives for wellness and health management programs and then a quarter on weight management, physical fitness and things like tobacco cessation programs. So those numbers are up significantly over the years and they're just taking it very seriously.

About 46% are either today imposing penalties or considering that [for plan participants with] high cholesterol, high BMI, that kind of thing.

If you look at a rate of increase of more than 8% in an economic situation that we've been facing over the last three or four years, and with health care reform around the corner where your obligations go up, you have to do something differently.

In terms of the productivity that you ultimately want to yield in terms of your own company's performance, this becomes incredibly important. So we have a big and very well-regarded practice around the more holistic aspects of wellness.


Would any of that be lost with employers joining the exchange system?

Actually, we think that the demand will go up. And the reason for that is regardless of the health care cost, the productivity piece of that is incredibly important. So if you can reduce absenteeism, if you can cause people to adopt healthier behaviors, they're more engaged, they're more clear thinking, they're more innovative.

The value proposition, the return on investment with or without health care reform, with or without group-sponsored health plans, is here and we're seeing nothing but an increase in that. Even for companies that have already moved more toward an individual level of responsibility for their health care.


What is your outlook on evolving past the commission compensation structure; the future of the profession and how it's changing?

I would say it's moving more toward outcomes. It's varying a lot depending on the service you're talking about, but obviously there's a continued brokerage environment. If you look at the big picture in health care, we really believe in the end we all need to be accountable for improved health outcomes, improved cost curve, access to talent, those kinds of things.

So I think you'll see the business model move more toward outcomes-based compensation in terms of service providers. That will ebb and flow as you go through the process to sort it out, but I think in the end the bottom line around outcomes - and regardless of the pricing structure - we seek to drive measurable outcomes for our clients because that's where the value is measured. Not necessarily directly related to the price for the service.


What keeps you up at night?

Oh gosh. You know what? In the end - and it is one of the reasons I choose to come work for Hewitt seven years ago (now Aon Hewitt) - and that's that what we do matters a lot. It's important, it's consequential and there's never been a time when retirement and health and the wellbeing of people has been so important; the financial wellbeing, the physical and mental wellbeing - and we impact that greatly.

So if something keeps me up at night it's how can we craft the solutions that best deliver those kinds of results? And engaging our team in doing their best work; taking the combination of Aon Hewitt and being able to really drive the best of the assets that we have in the form of solutions for our clients.

It's just incredibly important and it's very time sensitive around health and retirement. So I worry about - and those who work with me would tell you - can we get there effectively and fast enough? Because our clients really need us to do a tremendous job.

That said, when I wake up and think about that I'm not awake too long because I have enormous confidence in our team. They are the best in the industry, they do a tremendous job. They are absolutely focused on what we need to do to drive better health and better retirement outcomes. That's why they're here. There's a purpose about it; they're dedicated to it.

So I wake up, I think about it, and I go back to sleep knowing that I'm leading the best team in the industry.


How has the company grown since the Hewitt acquisition?

Over the last year or so since we've come together - we closed in October 2010 - we've discovered more and more opportunities to serve clients with the combined assets of the company. Health care reform really is a big piece of that. We are going big into health. We are completely committed to it being one of our top strategies because it is of that level of importance to our clients, large and small alike, public and private sector alike. It is something that sits at the top of their agenda, so it's at the top of our agenda.

We really feel like we're in a great position, and the best position among our competitors and others, to serve our clients with a combination of capability related to their health challenges - which drive back into their talent, their productivity, wellness, the kinds of outcomes that drive an improved situation with respect to the cost curve.

Ken Sperling, national health exchange strategy leader for Aon Hewitt, goes into detail about the company's health exchange plan in a podcast on

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