Rising health-care costs and a climate of change brought about by the new federal health law are prompting American corporations to revisit the pact they've long had with employees over medical benefits.
Walgreen Co. 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. and Time Warner Inc. both said in recent weeks they will move thousands of retirees from their own company-administered plans to private exchanges. Sears Holdings Corp. and Darden Restaurants Inc. 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.
Like the shift from pension plans to 401(k) plans beginning in the 1980s, the moves mark a transition in which employers are handing their workers more control over their benefits, some experts say. But as companies set their contributions at fixed amounts to limit benefits spending, workers could wind up shouldering a greater share of the burden if health costs increase.
Medical prices are rising at their slowest pace in a half century, according to Commerce Department data. That trend may help businesses, but it also reflects how cost burdens are shifting to patients. Many are being asked to comparison-shop or make tough choices on medical care as their health plans have become less generous. Overall health costs take into account both prices and the volume of health services patients use.
"You're completely moving away from a paternalistic employer deciding what's best for employees," says Paul Fronstin, an economist for the Employee Benefit Research Institute in Washington. "Workers don't need their employer anymore for health coverage. They just need the employers' money," he says.
Private exchanges amount to online marketplaces in which employers can select a slate of health plans to offer to workers. The employer typically agrees to contribute a lump sum that workers can apply to a plan of their choosing.
The health law helped the private-exchange business take off in part because the law borrows the concept for public exchanges in which lower-income people can use federal subsidies to buy insurance. Some businesses have used private exchanges for years.
As the health law was taking shape, President Barack Obama said people with employer-sponsored health plans would be able to keep them. While the health law metes out relatively few requirements for big employers, its impact on the industry has created a climate of change.
The economic recession also accelerated the trend for many companies, says Helen Darling, president of the National Business Group on Health, a Washington nonprofit representing more than 300 large firms. Employers "were beginning to let go of the idea that they could provide benefits with no constraints," says Ms. Darling. "They began shifting in their thinking to say, 'we're not necessarily going to guarantee that we'll provide 80% of the cost of benefits.'"
Big companies have been gradually pushing far more of the costs of health care to workers. More than one-third of workers at companies with 200 or more workers had annual deductibles of $1,000 or more last year, according to a report by the Kaiser Family Foundation. That's up from 10% of workers at those businesses in 2006.
Though companies point to the health law for accelerating the trend of broad benefits changes, supporters of the law note some firms may be using it for cover as they make adjustments that aren't always popular with workers.
Strategies like moving workers to private exchanges "may be the way of the future, but don't blame the Affordable Care Act for it," says Ezekiel Emanuel, a former Obama administration health-care adviser and University of Pennsylvania professor of health-care management.
"For decades, rising health-care costs have burdened employers, but since the Affordable Care Act became law, health-care costs have been slowing and premiums are increasing by the lowest rates in years," said Erin Shields Britt, a spokeswoman for the Department of Health and Human Services.
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.
Mr. Englizian said another reason behind the private-exchange decision was offering employees more health insurance options.
Some 24% of employers said they were "likely" over the next five years to provide access to a private or corporate health exchange where workers select from various options, according to a March report by Towers Watson and the National Business Group on Health, which surveyed 583 larger companies. Some 45% said they were neutral, and 30% said they were unlikely to make such a move.
The insurance landscape is shifting in other ways. Earlier this month, Trader Joe's Co. said it would end coverage for part-time workers. The privately-held grocery chain said in a statement it would give those workers $500 to buy insurance elsewhere.
In August, United Parcel Service Inc. said it would end benefits for 15,000 spouses of its employees who are able to get coverage through their own employers. UPS said Tuesday no spouses would become uninsured as a result of the shift.
Write to Timothy W. Martin at timothy.martin@wsj.com and Christopher Weaver at christopher.weaver@wsj.com
0 comments:
Post a Comment