In a letter, the company told retirees it had observed double-digit annual increases in the cost of their health coverage.
“We are therefore announcing a change in the way retirees age 65 or older can purchase health coverage that we believe provides more plan options and better value,” the company wrote.
Duke Energy plans to release details later, but retirees won't get the company's stipend unless they buy coverage from UnitedHealthcare for policies that take effect in January.
The move affects not only retirees ages 65 and older but also their spouses and dependents ages 65 and older who receive retirement benefits from the company or any of its predecessors or subsidiaries in six states.
Walgreen, the nation’s largest drugstore chain, said Wednesday that it will send workers to a private health insurance exchange where they will pick from as many as 25 plans instead of having the company give them two to four options.
Employers normally pay most of the coverage cost, and Walgreen’s contribution toward the benefit won’t change. It said the move will give its workers more choices and help them become better consumers.
“I think the only way to drive down costs in the health care space is to have the consumer buying the health care be knowledgeable and educated and understand what they are buying, ” said Tom Sondergeld, senior director of health and wellbeing for the Deerfield, Ill., company.
IBM, Time Warner, Caterpillar, General Electric, DuPont and others have made similar announcements. More companies are expected to follow the trend of offloading retirees from the company’s responsibilities.
Michael Suttman, president of McGohan Brabender, a Moraine company which helps businesses implement benefit programs, thinks more of both of these kinds of announcements in coming years.
“That will obviously be dependent on the success of the larger companies,” Suttman said. “They will set the pace for how the market goes.”
Walgreen’s action in particular can be likened to what companies have done for decades, moving from defined benefit retirement plans to defined contribution plans, he said.
“It’s kind of a reflection of a change in benefits that we’ve been seeing for years,” Suttman said. “It’s the 401K’ing of medical plans.”
Employers have struggled for years with health care costs that climb faster than inflation and consume growing portions of their budgets each year. More are starting to veer from the decades-old practice of offering workers only a plan or two with benefits the employee might not want.
The alternative, called defined contribution health insurance, involves giving employees a set amount of money and then letting them pick their own coverage through a private marketplace or exchange that helps them sort out the choices.
The switch can make the employer’s health care costs more predictable. But it also means workers who are used to having their coverage chosen for them could wind up with big medical bills and inadequate coverage if they don’t pick wisely.
The exchanges are similar to the public exchanges or marketplaces that will debut next month for coverage that starts in 2014 as part of the health care overhaul, the massive federal law that aims to cover millions of uninsured people.
Walgreen runs more than 8,100 drugstores nationwide and provides health coverage for about 180,000 employees and dependents. It also will use Aon Hewitt’s exchange for coverage that starts next year.
Aon Hewitt started offering its private exchange last year, and has about 200,000 people covered through it in 2013. It expects that total to triple to more than 600,000 people for coverage that starts next year. The consultant said it has 18 companies, each with more than 5,000 employees, lined up for next year.
Staff Writer Thomas Gnau contributed to this report.
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