(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 17 (Reuters) - Walgreen Co is moving 120,000 employees to a private health insurance exchange from coverage provided directly from carriers, the company will announce Wednesday.
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 who are.
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 strategy leader.
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 the country.
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 mission.
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)