September 19, 2013

Trend: Workers shop exchange for health benefits

Walgreen is the latest company to make the shift away from offering just a few plan options itself.

The Associated Press

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Walgreen Co. will start giving workers a contribution toward the cost of health coverage and then send them to a private insurance exchange to pick from as many as 25 plans.

The Associated Press

"It's a little bit more involved than buying a plane ticket, but I don't think it's more involved than buying a TV," said Ken Sperling, Aon Hewitt's national health exchange strategy leader.

PLAN SELECTED IS KEY TO COST

The employer's contribution to coverage purchased on these exchanges may wind up covering a greater or smaller portion of the insurance bill than the worker is accustomed. It depends on the plan selected.

Employer-sponsored coverage is the most common form of health insurance in the United States, covering more than 149 million non-elderly people. Benefits experts say defined-contribution plans make up a relatively small slice of that total, but the trend is expected to grow, especially with big companies.

A total of 29 percent of firms with 5,000 or more employees surveyed earlier this year by the nonprofit Kaiser Family Foundation said they are considering offering benefits through a private exchange. In contrast, only 7 percent of companies with 200 to 999 workers are considering it.

Health benefit trends tend to grow slowly. Many companies prefer to wait to see how other companies fare after making a big switch before they try it on their own employees.

But benefits experts say more companies are starting to appreciate the stability that defined-contribution plans offer. The approach means a company that pays its employee medical bills isn't on the hook for an unexpected expense if a wave of big claims hits during the year.

"It's something they can budget for, as opposed to something they are surprised with," said Aon Hewitt's Sperling.

 

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