Walgreens said today that it's just about done with managing its company-backed health care program. Following the lead of some other big companies, like Sears, IBM and Time Warner, Walgreens is moving employees and retirees to what are known as private exchanges. These bring together several insurers offering competing plans in a single online marketplace, where employees can shop for coverage. (Private exchanges are not the same as the public ones that are part of the new health care law. ) Walgreens will continue to pick up a portion of the premium. The employee will carry the rest.
Walgreens says it will contribute just as much to employees’ health insurance premiums in 2014 -- when the exchange kicks in -- as it did in 2013, when employees had only two company-sponsored plans to choose from. The company won't discuss how big its contribution will be, or what the typical cost to the employee.
On the Aon exchange, says Walgreens spokesman Michael Polzin, “each carrier will offer five different levels of plans to choose from.”
The plan categories are bronze, bronze plus, silver, gold, platinum. Polzin says in some markets, the exchange may offer as many as five competing insurance carriers. That could give consumers “as many as 25 different options, ” he says. They range from low-deductible to high-deductible plans and have varying levels of premiums and co-pays.
“It’s the king of all nightmare decisions,” says consumer psychology expert Kit Yarrow at Golden Gate University. “It’s not necessarily rationally so, it’s emotionally so.”
Yarrow says that's because the stakes can feel like life and death, or at least, life and ill health. And, she says, “people have a really tough time anticipating their future needs.” Will they need routine check-ups, or cancer treatment, in the coming year? And if they have a serious health problems, will the cheapest, most-limited plans give them enough good doctors to choose from?
Psychologist Barry Schwartz at Swarthmore College says that multiple choices, especially in a complicated marketplace like health care, can leave consumers worse off in the long run. He studies the issue in his book “The Paradox of Choice.”
“What economists would say is that more options have to be better because if you’re not interested you can ignore them,” says Schwartz. “But what research shows is that when you do that, it paralyzes people and they don’t choose at all. And when you give them too many options they make worse decisions.”
Michael Polzin of Walgreens says Aon, its exchange administrator, will help employees sort through the different plans. And, he says, having more health insurance choices -- with higher deductibles and lower premiums -- may well save some employees money.
Robert Town, a health care economist at the University of Pennsylvania’s Wharton School, agrees that having too many plans to choose from might confuse some employee-consumers.
But he says the public might as well get used to shopping for health insurance this way, because that's the future.