As its CEO Howard Schultz hinted at last week, Starbucks is indeed moving its employees onto a private health insurance exchange starting in October, offering employees who work at least 20 hours a week a choice of five levels of plans from up to six national and regional health insurance carriers. As the Wall Street Journal reports, the coffee chain is one of the most high-profile employers to take advantage of this option.
In recent years, several large companies including Walgreen Co., Sears Holdings Corp.and Darden Restaurants Inc. have moved employees onto private exchanges, which are essentially online marketplaces where employers can have their workers choose health plans. But they haven’t caught on as quickly as insurers once expected. Consulting firm Accenture PLC had estimated that 40 million Americans would be getting insurance through private exchanges by 2020, but only about eight million people have done so. …
[Scott Brown, a managing director at Accenture] said many of the largest employers aren’t yet convinced that the exchanges actually can reduce the cost of health coverage, as opposed to simply being used to transfer a greater share of the expense to workers. The move by Starbucks—which said it wasn’t aiming for cost savings—comes at a time when retailers are facing a tight labor market and various state and local minimum wage increases.
CNBC details how Starbucks says its new exchange system will work:
While some options will have higher monthly employee premiums than the current option, they also could have lower out-of-pocket health charges for workers. Conversely, some options would have lower premiums, while having higher out-of-pocket charges, including deductibles, copayments and coinsurance. …
The company’s current health coverage is offered via Premera Blue Cross. Starbucks workers have been able to select one of three Blue Cross plans: a gold plan, silver and bronze. The amount of health benefits that are covered by the plan decreases as the “metals” go down in value — with bronze plans as a rule having the lowest premiums but larger out-of-pocket costs imposed on workers when they obtain medical care.
Under the new private exchange platform that will begin Oct. 1, Premera Blue Cross will be joined by three other national carriers as options for workers: Aetna, Cigna and UnitedHealth, according to Starbucks. In some regions of the country, one or two other regional health plans will be offered to workers. And there will be five different levels of coverage: platinum, gold, silver, bronze plus and bronze, the company said.
While switching to the exchange will surely lower costs for some employees, it may well raise them for others. Critics of tiered health insurance coverage, such as what the exchanges offer, say that by shifting the cost of health care onto the people who need more of it, it undermines the rationale of group health insurance.