(In the first paragraph, corrects the date of the announcementto Wednesday from Friday. In the 2nd paragraph, clarifies thepayments made to employees.)
By Beth Pinsker
NEW YORK, Sept 17 (Reuters) - Walgreen Co is moving120,000 employees to a private health insurance exchange fromcoverage provided directly from carriers, the company willannounce Wednesday.
The pharmacy chain will join 17 other large employers on theAon Hewitt Corporate Health Exchange as part of agrowing movement to offer employees fixed dollar amounts topurchase their own plans on such exchanges.
The end-cost to employees depends on the plan chosen, butthey typically get more options than under traditionalarrangements. Private exchanges mimic the coverage mandated aspart of the Affordable Care Act. Enrollment in the publicexchanges starts Oct. 1.
"What happens to employer contributions over time? Will theyput in as much as they put in the past? These are unansweredquestions but potential negatives," says Paul Fronstin, a seniorresearch associate with the Employee Benefit Research Institute.The benefit to Walgreen and other employers is unknown at thispoint, as their cost-savings are not clear.
Of the 180,000 Walgreen employees eligible for healthcareinsurance, 120,000 opted for coverage for themselves and 40,000family members. Another 60,000 employees, many of them workingpart-time, were not eligible for health insurance.
Aon Hewitt says other participants in its program includeretailer Sears Holding Corp and Darden Restaurants Inc. These new additions raise enrollment to 330,000 from100,000 last year, and Aon Hewitt estimates enrollment will jumpto 600,000 next year, a fivefold increase from 2012.
By 2017, nearly 20 percent of employees nationwide could gettheir health insurance through a private exchange, according toAccenture Research. A recent report by the National BusinessGroup on Health said that 30 percent of large employers areconsidering moving active employees to exchanges by 2015.
Other major providers of private exchanges include Mercer, adivision of Marsh & McLennan Companies Inc, and TowersWatson & Co. Mercer said this summer that it had fivemajor employers enrolled but did not name them. Towers Watson isin the process of launching an exchange. Smaller companies, likeBuck Consultants, Willis North America Inc andregional 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 forthose not yet Medicare-eligible and other exchanges for thosewho are.
CHANGES IN COVERAGE
The five plan choices in Aon Hewitt's private exchange carrynames used across the sector - bronze, bronze plus, silver, goldand platinum - and costs are based on the amount of coverage,says Ken Sperling, Aon Hewitt's national health exchangestrategy leader.
Bronze and silver plans typically have high individualdeductibles - $1,250 or more - meaning that they do not kick inuntil a participant's out-of-pockets costs exceed the amount ofthe deductible. Gold and platinum plans have lower deductiblesand offer more coverage.
Healthcare premiums for these plans rose about 5 percentlast year, consistent with the industry average recentlycalculated by the National Business Group on Health.
For some employees the exchanges could offer more choice.Walgreen's employees eligible for healthcare coverage were askedin the past three years to choose between two plans, both withhigh deductibles. Those plans were managed by Blue Cross BlueShield or United Healthcare, depending on the area ofthe country.
Walgreen's offering last year matched the silver plan onAon's exchange, so there are two options that are less expensiveand two that are more expensive.
Based on Aon Hewitt's data collected so far, about 42percent of participants choose a plan less expensive than theyhad previously used, while 26 percent choose a higher-cost planand 32 percent stay at the same level.
Tom Sondergeld, senior director of health and well being forWalgreen, said Walgreen joined a private health exchange tooffer its employees more choice, while still supporting agenerous pharmacy benefit he said was central to the company'smission.
Walgreen is not planning any other major benefit changes for2014, which starts in late October, Sondergeld said. The companywill continue its reward-based wellness programs and a smokingsurcharge of roughly $600. It will not change coverage forspouses, as UPS recently announced. (Follow us @ReutersMoney or at http://www.reuters.com/finance/personal-finance. Editing by Lauren Young and Prudence Crowther)
- Aon Hewitt