The Corner

Walgreens to Change Employee Health Plans

Walgreens is the latest company to change the way it will provide health-care insurance to its employees. The move is motivated in part by the changes to the health-care market triggered by Obamacare. The Wall Street Journal explains:

Walgreen is set to become one of the largest employers yet to make sweeping changes to company-backed health programs. On Wednesday, the drugstore giant disclosed a plan to provide payments to eligible employees for the subsidized purchase of insurance starting in 2014. The plan will affect roughly 160,000 employees, and will require them to shop for coverage on a private health-insurance marketplace. Aside from rising health-care costs, the company cited compliance-related expenses associated with the new law as a reason for the switch.

Walgreen is the latest in a growing list of companies making changes to their benefits. International Business Machines Corp. IBM +0.33% and Time Warner Inc. TWX +0.13% both said in recent weeks they will move thousands of retirees from their own company-administered plans to private exchanges. Sears Holdings Corp. SHLD -1.37% and Darden Restaurants Inc. DRI -0.08% said last year they would send employees to a private exchange.

Since the 1940s, health benefits have been a key part of many employees’ compensation. A long trend of rising health spending and a wave of changes to the health-care system are prompting many employers to rethink their roles in financing care for employees and their dependents. […]

Under Walgreen’s new arrangement, to take effect in 2014, the firm will pay a fixed amount for employees to select coverage options in a private insurance exchange run by Aon Hewitt, a consulting unit of Aon PLC. The exchange will offer up to 25 different plans in some states.

The options include HMO-style coverage with no deductibles and lower out-of-pocket costs than some plans. Also available are bare-bones plans with higher deductibles and leaner coverage. Workers could have premiums costing as little as $5 a month, Walgreen says, to appeal to the 36% of its employees who are single and under 30 years old.

It isn’t clear how much money the move might ultimately save Walgreen or whether its workers will face higher costs. Mark Englizian, Walgreen’s vice president of compensation and benefits, said the submitted bids for monthly premiums for the private exchanges were roughly equal to its current 2013 rates—meaning some savings could come from the fact the bids didn’t factor in year-over-year increases.

As the article notes, this is one more of the promises made by President Obama that won’t materialize. He had promised that people with employer-sponsored health plans would be able to keep them under the new law. While the move may not be entirely the result of Obamacare, its influence is fairly clear. The whole thing is here.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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