Big companies give employees fixed funds for insurance

Two large U.S. companies, Sears and Darden Restaurants, are overhauling how they provide health insurance by giving their employees fixed amounts of money to buy insurance plans from a health insurance exchange.

The move means insurers selling plans through the private exchange, run by consulting firm Aon Hewitt, will compete directly for the two companies' almost 140,000 employees, hopefully contributing to lower overall healthcare costs, reported The Wall Street Journal. Selling plans through an exchange drives competition and efficiency, said Ken Sperling, Aon's national health exchange strategy leader.

"It puts the choice in the employee's hands to buy up or buy down," Danielle Kirgan, a senior vice president at Darden, which owns restaurant chains Olive Garden and Red Lobster, told the WSJ.

If other companies follow in the path of Sears and Darden, it could spark a transition in how health insurance is provided, similar to the change from pensions to 401(k) savings plans. "There will be a lot of interest in taking a look at those results," said Yasmine Winkler, chief product and marketing officer at UnitedHealth.

"It's a fundamental change … the employer is saying, 'Here's a pot of money, go shop,'" Paul Fronstin, director of health research at the Employee Benefit Research Institute, told the WSJ. The concern, however, is that "the money may not be sufficient and it may not keep up with premium inflation."

Some insurers are taking note of the impending transition. For example, WellPoint has allotted at least $50 million to better position itself to sell plans on exchanges, which will make brand name, price and convenience the most important factors for success, FierceHealthPayer previously reported.

Neither Sears nor Darden disclosed the exact amount of money it would provide employees to buy insurance, but Darden said it would increase the money as healthcare costs rise.

To learn more:
- read the Wall Street Journal article