Sears Employees Find Value in Private Health Exchange

By Bruce Shutan

As many as 90,000 Sears employees are finding it easier to shop for health care, are savvier about their coverage choices and finally understand the meaning of value since the 129-year-old retailer switched to a private health insurance exchange three years ago.

Dean Carter, the company’s chief HRO, revealed these and other details during a recent summit about the future of health care in Washington, D.C. The event, which drew more than 500 business leaders, was hosted by the Advisory Board Company.

“When we were considering what to do when we first went on the exchange, we could have continued to manage our plan aggressively just like we’d done for many years,” he explained, addressing a concern about the political instability around public health care policy slowing the private HIX adoption rate.

“But the ACA was coming and looming,” he continued, “and we decided to go ahead and move. Now we didn’t need the ACA to implement the private exchange is what we discovered, but the ACA was the disrupter that caused us to think differently about [how] maybe we could reinvent the way we looked at how we provide health care to our associates.”

Sears wasn’t able to start bending the cost curve until its employees learned to become smarter consumers of their health care, according to Carter.

To arrive at that point, he said they needed to be able to choose their own carrier, which 90% of Sears employees say they appreciate being able to do. He said there also needs to be transparency around the price of health care and how those costs vary even on a regional basis, health plan participants need to be held accountable for their choices and the process of choosing carriers and setting prices needs to be accelerated from three-year contracts under the traditional fully insured model to annual RFPs.

With all these pieces in place, Carter believes the result “could be a very compelling future for consumer behavior in health care.” Sears already decreased its health care costs by 10%, or $38 million, in just the first year of the private HIX. The retail giant is one of three initial clients that Aon Hewitt signed up for its fully insured private exchange for 2013, the other two being the consulting firm itself and Darden Restaurants.

Carter referenced the retail industry’s cost pressures in 2011 at the time leading up to Sears deciding on the private HIX model when employee cost-sharing expenses were moved or squeezed as much as they could have been.

“If this were just an expense issue, we could just eliminate health care, completely,” he said, “but it’s not just an expense issue. It’s an attraction issue. We do this to be competitive in the market so that we can get great talent.”

Annual employee surveys found that in the first year of the private HIX, Sears employees were most interested in knowing how the new model compared with the old one and that nearly one-fourth thought they had too many choices, Carter noted. In the second year, their focus was on the lowest-cost provider and less than 10% thought they had too many choices, which shifted in the third year to the plan with the best possible value for their family and less than 5% thought they had too many choices.

Carter quipped about how employees now attend their annual benefits fair more concerned about knowing why certain carrier rates have increased than walking away with Frisbees and stuffed Snoopy dolls. He also recalled the first time in 20 years as an HR professional that an employee asked him how they could achieve better transparency from carriers with the lowest rates that might not have negotiated the best deals with the providers that they prefer.

“I’m finding that they’re requesting a higher degree of transparency from us,” he added, also noting how Sears employees are salting away dollars in health savings accounts and appear motivated to become better consumers of their health care services.

In addition, Sears employees are gravitating toward internal social media as a powerful decision-support tool that’s usually buzzing during open enrollment. “People believe their buddies and their friends at work more than sometimes the stuff they read in other places,” Carter suggested.

Asked by an attendee whether Sears employees are healthier today than they were before the private HIX was offered, Carter noted that each carrier manages its own wellness program, and while he cannot say with certainty whether the outcomes are better, employees appear more interested in their health than in the past.

“I see more people wearing Fitbits and Jawbones and Nike Fuels, and I see competitive networks that are arising,” he said. “And because we’re giving people choice and now they’re responsible for their health care, they’re doing it because they’ve accepted a level of risk. I do see employee behavior changing and taking more responsibility.”

Reprinted from Employee Benefit News

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