Walgreens is apparently planning to sell health insurance with different price points and coverage levels through a private insurance exchange this fall. Should existing, well-established insurers be concerned?
The pharmacy giant Walgreens already is a leader in healthcare services--operating in-store clinics, offering immunizations and counseling for chronic conditions, and providing prescription drug and medical plans--so some experts say selling insurance is a logical next step for the ubiquitous drugstore chain.
If the reports are true, Walgreens will allow consumers to shop for various insurance products online, through call centers, or in-store. Some will be branded by national insurers, and others will be "private-label" insurance products sold through Walgreens' own insurance exchange.
And that's not all. Industry watchers are predicting other companies, even those not associated with health insurance, are eager to jump into the soon-to-be lucrative health insurance exchanges. Retailers, financial services providers, and large payroll processers all might become the new kids on the insurance block, hoping to buy up some premium land in town. Come 2012, consumers purchasing individual insurance may turn to private exchanges for policies that are more affordable than what's available directly through insurance companies. Plus, private exchanges will be competing with state-run public exchanges by, for example, bundling life insurance, along with their health insurance products.
But I wonder whether customers will be open to buying health insurance from a retail store. Will they trust the retailers’ ability to provide competitive prices and products, as well as quality customer service? Or will they be skeptical of new entrants in the insurance industry, reluctant to purchase a product from a company that isn’t operating in its principle area of business?
The one thing I know, at this juncture, is that insurers shouldn't dismiss Walgreens as just a fringe competitor if it does enter the insurance market. Walgreens has proven itself adept at succeeding in the changing healthcare business, stepping up to challenges throughout the years. Company revenue and operating income have grown over the past four years. It has increased its share of prescriptions and developed new revenue streams. And it has become the in-house supplier of healthcare services for hundreds of large companies while also partnering with major health insurers to counsel their members.
Although we won't know how a company such as Walgreens will affect the core health insurance business, it seems at least that this could serve as a lesson. Big health insurers better not sit on their laurels, assuming they're the only sheriffs in town. They should be casing the streets, watching for any upstarts to ensure they protect their town from any unwanted competition. - Dina