Let's Talk About Retailers And Health Insurance

When Walgreens (NYSE:WAG) announced this week that it will move all 180,000 of its employees to a health-insurance exchange, it changed the conversation for retailers. Until now, that's largely been about whether part-time employees would be forced to lose hours so restaurants and retailers wouldn't be required to offer them insurance under the Affordable Care Act. They don't have company-paid insurance now, and retailers were looking for ways of avoiding it going forward.

But Walgreens is a very different story. Somewhere between 120,000 and 160,000 Walgreens employees are reportedly eligible for company health coverage, ranging from full-time store associates all the way up to corporate executives. Many of them have always had company-paid health insurance. They'll still have company-subsidized insurance, but these aren't the people who were supposed to be facing a bewildering array of choices when Obamacare arrived.

The Walgreens shift makes employee health insurance a mainstream topic—one that's unavoidable anywhere from corporate down to the stock room of any store. And that's good, because while for the moment Walgreens is the biggest of a relatively small number of retailers who have gone the full exchange route, it isn't going to be long before most retailers do that.

Once that happens—once everyone, or even a significant percentage of employees, have been through a year or two of the new process, this will go back to being a discussion between the CFO and the head of HR. But until then, it's frightening. Many U.S. full-time workers have never had to make a significant medical insurance decision. They've always taken what their employer offered. Now they face the unknown.

They don't care that the company insurance they take for granted is a quirk of World War II history. Employer health insurance was really born when wartime wage controls made it impossible for employers to reward workers with higher pay. Health insurance? That was OK. It took off.

They also don't care that, 70 years later, the one-size-fits-all health insurance approach has become financially unsustainable and increasingly a cost borne by employees themselves. Employees don't want to know that. They just know that suddenly their traditional health insurance is gone.

And even if they end up with exactly the same coverage at the same cost that they would have if their employer was still handling their health insurance, until then it's a giant unknown that's literally a matter of life and death.

That means it's time to talk, all up and down the retail corporate ladder. Ironically, it's retailers like Trader Joe's, which haven't (yet) gone full-exchange, that have had to publicly explain the math for its health insurance decisions. There will need to be a lot of those walk-throughs, many of them one-on-one with store managers or HR people, for employees to become familiar with their options—now that, for possibly the first time, they have options.

Will retail employees at Walgreens and other chains eventually decide that they like the new way better? Maybe. According to Aon Hewitt, which is managing the insurance exchange for Walgreens, 26 percent of participants end up with a more expensive plan than what their employer used to offer, and 42 percent choose a less expensive plan. That's more than two-thirds who ultimately decide they want more control over their insurance benefits than they used to have.

But the first year will be unavoidably rough. The more examples, explanations and simple discussions that associates, managers and executives have about what's happening to their insurance, the less frightening and the more familiar this will become.

Let the conversation begin.