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Tuesday, September 17, 2013

Private Exchanges in Lieu of Traditional Private Insurance Plans Gain More Ground

Source: Forbes
Author: Bruce Japsen

Walgreen Joins Rush To Employer Exchanges, An Alternative To Obamacare Marketplace

Walgreen Co. and another 17 large employers are turning to a new concept of offering workers health benefits via private online marketplaces known as exchanges such as one run by Aon Hewitt.

Walgreen WAG +0.13% Co. (WAG) and another 17 large employers are turning to a new concept of giving them money to buy health benefits via private online marketplaces known as exchanges.

Aon AON +2.84% Hewitt, (AON) the large employee benefits consultancy, said Walgreens will be the largest employer thus far to join its Aon Hewitt Corporate Health Exchange, bringing more than 160,000 eligible employees to such coverage in 2014. Aon Hewitt said it could not yet disclose the others coming into the exchange in 2014.

On Jan. 1, 2014, Aon Hewitt expects more than 330,000 employees to be have enrolled in its exchange. Pioneers in the effort include Sears Holdings SHLD -5.03% (SHLD) and Darden Restaurants DRI -0.32% (DRI), which have employees signed up.

The exchanges work like those that are expected to be operational by states or the federal government next month under the Affordable Care Act next year in that they offer consumers more choices plus people who buy coverage are empowered to make choices for their individual needs, benefits consultants say. Open enrollment for uninsured individuals under the health law begins Oct. 1 and runs through next March.

Under the health law signed into law by President Obama, millions of Americans in January of next year who have no coverage will receive federal subsidies of about $5,000 to help them buy coverage from health insurance companies that sell individual and small group policies. That subsidized coverage will be offered on exchanges as well but those marketplaces will be operated by each state or the federal government or a partnership between state insurance administrations and the U.S. Department of Health and Human Services depending on the state.

Thus, Walgreen and other employees are not headed to an open market like the uninsured under the health law who will sign up for coverage on government-run exchanges.

Aon Hewitt’s exchange works with each employer in the exchange deciding on the subsidy or “credit” that each worker will get to purchase coverage offered by the employer. Then, the employees take to the AON Hewitt exchange to select their coverage. The subsidy will vary from employer to employer.

“(The exchange) seeks to mitigate health care cost increases by creating an efficient marketplace that fosters competition at a consumer level and offers an improved employee experience and greater choice for employees,” said Ken Sperling, Aon Hewitt’s national health exchange strategy leader.

Walgreens is calling its marketplace the “Living Well Benefits Store,” which the drugstore chain says is an “outsourced solution through” the Aon Hewitt exchange.

“We are continuing to invest in the health of our team members and their dependents through expanded choices to personalize their health care coverage in a competitive environment, giving our diverse workforce the flexibility they need to meet their health care needs,” said Kathleen Wilson-Thompson, Walgreens senior vice president and chief human resources officer.

Critics of the private exchange approach say it’s a way for employers to freeze the amount of money they provide to workers by essentially giving them a chunk of money and telling them to “go buy their own health care” with no promise that the amount offered to workers will rise or keep up with medical inflation in the future.

No matter how well-funded it is from employer to employer, it’s an approach that is gaining momentum. Other benefits firms are pushing it to employers. Aon Hewitt rival Mercer earlier this year said that 10 major insurance carriers, including Aetna (AET), Cigna (CI), Humana (HUM), UnitedHealth Group (UNH) and a host of Blue Cross and Blue Shield plans have signed on to the firm’s “private exchange for 2014 enrollment.”



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