Coffee chain Starbucks Corp. is moving thousands of employees to an online health insurance marketplace. Yet these types of private exchanges still have not taken off despite lofty industry predictions.
Employers have turned to private exchanges over the past several years as a way to move toward defined-contribution health benefits, which provide more budget predictability for companies but could result in higher costs shifted onto the shoulders of employees. Companies also tout the marketplaces, which essentially are online shopping venues for employees to pick their own plans, as a way to provide workers more choices in their health coverage.
Starbucks, which has about 157,000 U.S. employees, said last week that it hired benefits firm Aon to run its new insurance exchange.
Premera Blue Cross used to be Starbucks' lone health insurance carrier. Now, employees will be able to choose from four to six national and regional carriers. Aetna, Blue Cross and Blue Shield, Cigna Corp. and UnitedHealth Group will be the four national carriers, and regional carriers will vary, according to a Starbucks spokesperson. Each insurer will offer five different plans.
Starbucks will cover 70% of premiums, similar to silver plans offered on the Affordable Care Act's public exchanges.
The coffee conglomerate joins a small ring of other large employers, including Walgreens Boots Alliance and Darden Restaurants, that have implemented a private insurance exchange. Yet consulting firm Accenture estimates only 8 million people had their job-based health insurance through a private exchange in 2016. Accenture predicted last year that 12 million people would choose employer plans on a private exchange in 2016, and in 2014, that prediction was 19 million.
The current 2016 total represents 5% of the roughly 155 million Americans who have employer health coverage. It's also far from from Accenture's previously published estimates that 40 million employees would be on a private exchange by 2018.
Scott Brown, a managing director at Accenture, which works with benefits consultants and insurers on private exchange strategies, pinned the lower-than-expected enrollment on a few factors. The wide range of private exchange options has not attracted other large companies, and the marketplaces have had a difficult time proving their value of lowering long-term medical costs, Brown said.
The delay of the ACA's Cadillac tax, which levies a fee on generous employer plans, also has tempered the uptake.
“We saw (the Cadillac tax) as a significant inflection point that would drive employers to rethink their health benefits,” Brown said.