Big suburban firms joining private health exchanges

With its announcement that it will move 240,000 employees to private health exchanges, Walgreens adds to the thousands of suburban workers who will find themselves choosing health care coverage in a new way for the coming year.

Eighteen major companies, including Deerfield-based Walgreen and Hoffman Estates-based Sears Holdings, have switched from traditional health insurance offered directly to their employees to a private health care exchange operated by Lincolnshire-based Aon Hewitt, the companies said Wednesday.

This major shift in how workers obtain their health insurance coverage provides them with more options while it reduces risks for the corporations. But who, if anyone, will be the winner or loser in such a new marketplace is yet to be determined, experts said. Private exchanges, such as the one operated by Aon Hewitt, are different from what will be offered nationally by state and federal governments through the Affordable Care Act, also known as “Obamacare.” The Aon Hewitt Corporate Health Exchange is a private health exchange for large employers and offers group health insurance policies that are subject to the same rules that exist in traditional employer-sponsored health benefits, Aon said.

The government exchanges are primarily for individuals, especially those who are uninsured.

The Aon Hewitt Corporate Health Exchange projects more than 600,000 people are expected to be under the plans in 2014.

Aon Hewitt's exchange offers employees, retirees and their families a range of plan options, carriers and prices. Participating employers are in various industries, including retail, wholesale trade, business, professional services, hospitality, health care, technology, communications, financial and manufacturing areas, Aon Hewitt said.

“By moving to a corporate exchange, we're now offering our employees more options at a range of different costs,” said Walgreen spokesman Michael Polzin. “We have a very diverse workforce of about 240,000 people nationwide and this exchange offers them a number of options.”

Walgreens traditionally offered two options to its employees for their health care coverage for the year. Now, those workers will pick and choose among about 25 insurance carriers on the Aon Hewitt exchange, Polzin said.

Walgreens and other companies decided to go with the corporate exchange because it reduces their risk, Polzin said.

“Before, we were self-insured and gave the two options to our workers,” Polzin said. “But by going to a private exchange, the risk is with the insurance carriers rather than us.”

If Walgreen had continued its traditional offerings, the company likely would have been paying more in the long run, Polzin said.

Sears Holdings also touted the increased flexibility employees, including roughly 90,000 at Sears and Kmart stores, receive from the insurance exchange.

Like Walgreens, Sears is subsidizing eligible workers and their family members' medical benefits just as it did in its traditional health care model, said Sears spokesman Howard Riefs.

“This approach to medical coverage better meets the needs of our diverse workforce, while also providing our company with increased efficiencies in our health care offerings due to the competitive marketplace created by the new model,” Riefs said.

But the devil is in the details, said attorney Janice Anderson with Polsinelli PC in Chicago.

“I would assume these large companies are providing their employees with a sum of money to purchase a health plan on the exchange,” she said. “If that is the structure, and if the amount is enough to purchase a plan with comparable benefits to what the company provided directly, then the change should not negatively impact the employee's coverage, but it caps the potential liability to the employer.”

Though the private exchanges are not linked to the Affordable Care Act, what is not clear is whether the expansion of coverage under the government program will stress the health care system, causing delays in appointments for all patients, Anderson said.

“This is not a function of whether the employee buys off the exchange or not but rather a function of the possible increase in demand once more people are covered,” Anderson said. Under the Affordable Care Act, uninsured people must sign up for coverage beginning Oct. 1 or face paying penalties.

The expanded options available in private exchanges are likely to be a good thing for healthy employees, who will be able to choose coverage with lower premium costs as opposed to the “one size fits all” options now available under many employer plans.

Employees who are not as healthy will still have access to a wide variety of plans that will likely fit their health needs, so participating in a private exchange can generally be thought of as a good thing for workers, said Anthony E. Antognoli, partner and lawyer with Hinshaw & Culbertson LLP in Chicago.

One concern might be costs, he said.

“By providing employees with a single lump-sum contribution to be used to purchase coverage on an exchange, employers may limit their health cost uncertainty and reduce or eliminate many of the administrative costs that come with maintaining a health plan,” said Antognoli.

Employees should typically expect to see employer contributions that cover a roughly similar portion of total costs as employers pay now. If the options offered under the exchange increase in cost at a rate beyond the increases in the employer contributions, then employees will be responsible for covering that gap.

These cost burdens are limited, however, Antognoli said.

“In order to avoid the (recently delayed) employer 'pay or play' penalty, employers will still have to ensure that the options offered under the private exchange are 'affordable' under the rules of the Affordable Care Act,” Antognoli said.

“The shift toward private exchanges is consistent with a trend in shifting responsibility for health care coverage choices to employees,” said Antognoli. “This trend predates the ACA, and we would expect to see that continue regardless of how the ACA works in practice.”

Suburban workers who enter Aon Hewitt's online exchange portal will see a range of consumer-based tools that enable them to sort and filter benefit options by price, insurance company and/or plan type. They will have access to a wide range of benefits experts and advisers, including Aon Hewitt's Advocacy Support team, to answer questions during enrollment and throughout the year.

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

“The Aon Hewitt Corporate Health 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,” Sperling said. “With our market-leading model, employers can minimize cost increases for themselves and their employees while maintaining their commitment to health benefits and enhancing companywide programs to increase employee health, well-being and engagement.”

The move to private health exchanges

18 companies will participate in the Aon Hewitt Corporate Health Exchange, including:

ŸHoffman Estates-based Sears Holdings, including Sears and Kmart employees

ŸDeerfield-based Walgreen

ŸOrlando, Fla.-based Darden Restaurants, including Red Lobster, Olive Garden, Longhorn Steakhouse and others.

Insurers participating in the Aon Hewitt Corporate Health Exchange include:

ŸAetna, Inc.

ŸAnthem Blue Cross and Blue Shield

ŸAnthem Blue Cross

ŸBlue Cross and Blue Shield of Georgia

ŸEmpire Blue Cross Blue Shield

ŸBlue Cross and Blue Shield of Nebraska

ŸBlue Cross and Blue Shield of North Carolina

ŸDelta Dental

ŸFlorida Blue

ŸHealth Care Service Corporation:

ŸBlue Cross and Blue Shield of Illinois

ŸBlue Cross and Blue Shield of Montana

ŸBlue Cross and Blue Shield of New Mexico

ŸBlue Cross and Blue Shield of Oklahoma

ŸBlue Cross and Blue Shield of Texas

ŸHealth Net, Inc.

ŸIndependence Blue Cross

ŸKaiser Permanente

ŸMetLife

ŸUnitedHealthcare

ŸVSP® Vision Care