(In the first paragraph, corrects the date of the announcement
to Wednesday from Friday. In the 2nd paragraph, clarifies the
payments made to employees.)
By Beth Pinsker
NEW YORK, Sept 18 Walgreen Co is moving
120,000 employees to a private health insurance exchange from
coverage provided directly from carriers, the company will
The pharmacy chain will join 17 other large employers on the
Aon Hewitt Corporate Health Exchange as part of a
growing movement to offer employees fixed dollar amounts to
purchase their own plans on such exchanges.
The end-cost to employees depends on the plan chosen, but
they typically get more options than under traditional
arrangements. Private exchanges mimic the coverage mandated as
part of the Affordable Care Act. Enrollment in the public
exchanges starts Oct. 1.
"What happens to employer contributions over time? Will they
put in as much as they put in the past? These are unanswered
questions but potential negatives," says Paul Fronstin, a senior
research associate with the Employee Benefit Research Institute.
The benefit to Walgreen and other employers is unknown at this
point, as their cost-savings are not clear.
Of the 180,000 Walgreen employees eligible for healthcare
insurance, 120,000 opted for coverage for themselves and 40,000
family members. Another 60,000 employees, many of them working
part-time, were not eligible for health insurance.
Aon Hewitt says other participants in its program include
retailer Sears Holding Corp and Darden Restaurants Inc
. These new additions raise enrollment to 330,000 from
100,000 last year, and Aon Hewitt estimates enrollment will jump
to 600,000 next year, a fivefold increase from 2012.
By 2017, nearly 20 percent of employees nationwide could get
their health insurance through a private exchange, according to
Accenture Research. A recent report by the National Business
Group on Health said that 30 percent of large employers are
considering moving active employees to exchanges by 2015.
Other major providers of private exchanges include Mercer, a
division of Marsh & McLennan Companies Inc, and Towers
Watson & Co. Mercer said this summer that it had five
major employers enrolled but did not name them. Towers Watson is
in the process of launching an exchange. Smaller companies, like
Buck Consultants, Willis North America Inc and
regional players, are also starting exchanges.
There are also separate exchanges just for retirees. IBM
, Time Warner Inc and General Electric Co
recently announced they were moving retirees to exchanges for
those not yet Medicare-eligible and other exchanges for those
CHANGES IN COVERAGE
The five plan choices in Aon Hewitt's private exchange carry
names used across the sector - bronze, bronze plus, silver, gold
and platinum - and costs are based on the amount of coverage,
says Ken Sperling, Aon Hewitt's national health exchange
Bronze and silver plans typically have high individual
deductibles - $1,250 or more - meaning that they do not kick in
until a participant's out-of-pockets costs exceed the amount of
the deductible. Gold and platinum plans have lower deductibles
and offer more coverage.
Healthcare premiums for these plans rose about 5 percent
last year, consistent with the industry average recently
calculated by the National Business Group on Health.
For some employees the exchanges could offer more choice.
Walgreen's employees eligible for healthcare coverage were asked
in the past three years to choose between two plans, both with
high deductibles. Those plans were managed by Blue Cross Blue
Shield or United Healthcare, depending on the area of
Walgreen's offering last year matched the silver plan on
Aon's exchange, so there are two options that are less expensive
and two that are more expensive.
Based on Aon Hewitt's data collected so far, about 42
percent of participants choose a plan less expensive than they
had previously used, while 26 percent choose a higher-cost plan
and 32 percent stay at the same level.
Tom Sondergeld, senior director of health and well being for
Walgreen, said Walgreen joined a private health exchange to
offer its employees more choice, while still supporting a
generous pharmacy benefit he said was central to the company's
Walgreen is not planning any other major benefit changes for
2014, which starts in late October, Sondergeld said. The company
will continue its reward-based wellness programs and a smoking
surcharge of roughly $600. It will not change coverage for
spouses, as UPS recently announced.
(Follow us @ReutersMoney or here.
Editing by Lauren Young and Prudence Crowther)