Walgreens to ask workers to buy health plans

The USA's largest drugstore chain said Wednesday that it will send its workers to a private health insurance exchange with money to buy their own plans.

The Walgreens exchange, run by benefits company Aon Hewitt, is similar to the state exchanges required under the Affordable Care Act. In those exchanges, uninsured Americans will buy health insurance plans on their own that are often subsidized by the federal government. In this case, Walgreens provides the financial assistance.

The Walgreens program provides more health coverage choices and an opportunity for most employees to lower their out-of-pocket health care costs next year, the company said.

Walgreens says it will also continue offering health insurance and wellness benefits to its employees as the plan administrator, while providing tools and resources that help employees personalize coverage for themselves and their dependents.

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Walgreens' move follows Trader Joe's announcement Sept. 13 that it was dropping part time employees from its health insurance plan and sending them to their state exchanges with $500 to put towards the plans.

Walgreens joins several other large employers, including Time Warner, International Business Machines (IBM) and Sears Holding - which owns Kmart, in the move towards private insurance exchanges.

"This is an irreversible trend from defined benefit to defined contribution employer-based health coverage," says Wendell Potter, a former spokesman for Cigna insurance, who is now an industry critic and watchdog. "It is comparable to the move several years ago from pensions to 401(k)s."

The "continued unraveling of the employer-based system of health coverage," which is prompted in part by the new health law, is good news, says Potter. But he worries too much of the burden of health costs are being shifted to employees.

Private insurance exchanges are similar to the state marketplaces that will begin enrolling uninsured people October 1. Rather than the federal government sharing the cost of many of the plans, people's employers kick in towards the premium.

Employees will be given the same amount of money to buy insurance on a private exchange run by benefits company Aon Hewitt as it contributes to their plans now, Walgreens said.

Aon Hewitt said today that 600,000 U.S. employees and their families will be covered under plans in the Aon Hewitt Corporate Health Exchange in 2014. Walgreens becomes the 18th large employer to offer health benefits this fall through the Aon Hewitt Corporate Health Exchange. The exchange will be the largest multi-carrier private health care exchange of its kind in the U.S..

The average health care cost for large employers in the U.S. has increased to more than $10,000 per employee over the last decade, and the amount employees will be asked to contribute is expected to grow much faster than the rate of salary increases, said Ken Sperling, Aon Hewitt's national health exchange strategy leader.

Walgreens has 8,117 stores in the U.S. and about 160,000 employees.

Benefits — or the lack thereof — have long been a point of contention for retailers who typically employ mostly low paid, often part-time workers. Walmart, the world's largest retailer, is often criticized by its labor union-backed employee groups for health insurance plans that are either difficult to qualify for because of erratic scheduling, hard to afford because of high premiums or high deductibles when premiums are more affordable.


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