In a move that will be closely watched by other U.S. businesses, two large companies -- Sears Holdings and Darden Restaurants -- are significantly changing the way they provide health benefits to their employees, by giving them a fixed amount and allowing them to choose their coverage from an online marketplace, the Wall Street Journal reports.
About the Changes
Darden, which has about 45,000 full-time employees, will allow workers to choose their coverage in November. The new coverage will begin on Jan. 1, 2013. Darden officials said that the money offered to employees will increase as health care costs rise and that employees with families will receive more money to cover additional costs.
Sears, which has roughly 90,000 full-time employees, did not reveal details of its plan. However, company officials said the design should benefit both the company and employees.
Both companies are self insured, which means the firms pay employees' claims. The hope is that insurers will lower their prices as they compete for employees to choose their health plans. Companies that run exchanges also have said that savings result from more workers choosing less-generous coverage. However, some consultants question whether the approach will benefit companies who already self insure to reduce costs.
Comments on Changes
Darden Senior Vice President Danielle Kirgan said that the change is not intended to shift more health care costs to employees. Instead, it "puts the choice in employee's hands to buy up or buy down," she said.
The move is a "fundamental change," Paul Fronstin, director of health research at the not-for-profit Employee Benefit Research Institute, said. It is as if "[T]he employer is saying, 'Here's a pot of money, go shop,'" he added.
According to the Journal, if the strategy becomes popular, it could mirror the transition many firms made from company-provided pensions to 401(k) retirement plans, which are controlled by workers and funded in part by the company.
Insurers Split Over Popularity of Approach
Insurers are split about whether the move will become commonplace in the coming years, the Journal reports.
WellPoint Executive Vice President Ken Goulet predicted that the tactic will be "mainstream" in the next two or three years. Wellpoint is expected to launch a new product next year called Anthem Health Marketplace, which will allow employers to offer a variety of health plans to their employees through an online marketplace.
However, UnitedHealth Group Chief Product and Marketing Officer Yasmine Winkler said that "[t]he jury's out" on whether the move will become prevalent. However, she added, "There will be a lot of interest in taking a look at those results" (Wilde Mathews, Wall Street Journal, 9/26).