Large Employers Set To Implement Corporate Exchange Coverage Models

In a major shift within the employer-sponsored health benefit model, Sears Holdings Corp. and Darden Restaurants Inc. will begin offering employees a choice of health plans on “corporate exchanges” beginning in 2013.

Although spokesmen for both companies have been quick to point out that, at this point, the firms will still be providing their employees with health benefits and not just a pile of cash with which to buy insurance, the move is largely seen as the first step towards a benefits system in which employers play a less direct role in employees’ coverage, and could influence thousands of other firms to follow suit if succesful. As the Wall Street Journal reports, the basic idea is that by offering employees more flexibility in choosing plans, both workers and employers can save on health costs:

“It puts the choice in the employee’s hands to buy up or buy down,” said Danielle Kirgan, a senior vice president at Darden. The owner of chains including Olive Garden and Red Lobster will let its approximately 45,000 full-time employees choose the new coverage in November, to kick in Jan. 1. Darden says that employees with families to cover will be given more money to buy insurance than employees covering just themselves.

The hope is that insurers will compete more vigorously to get workers to sign up, which will lower overall health-care costs. Darden and Sears are both currently self-insured, meaning that the cost of claims each year comes out of company coffers. […]

“Within the next two or three years, it’s going to be mainstream,” said Ken Goulet, executive vice president at WellPoint Inc. The insurer will roll out a product next year called Anthem Health Marketplace that lets employers offer a variety of its plans to workers, paired with a fixed contribution. Mr. Goulet said it is close to signing up more than 30 midsize and large employers for early next year, including one with more than 50,000 workers.

This method has innate risks to it, the biggest being the possibility that employer contributions won’t keep up with medical inflation, thus shifting costs onto consumers. But if the corporate exchange model pans out as advocates hope, then it could be a sign of good things to come for similar exchange-driven models, including Obamacare.