New on Starbucks’s Menu – Private Health Exchange

Starbucks has joined a growing list of high-profile U.S. employers that are controlling costs and expanding choices via a private health exchange. The company recently announced that it will shift from a single health insurance carrier to a private exchange – offering employees access to as many as six carriers and five levels of coverage.

“Providing industry-leading benefits for eligible full- and part-time partners is a cornerstone of who we are as a company,” said Ron Crawford, Starbucks vice president of global benefits. “Much like a travel site, our partners will be able to navigate an easy-to-use online platform to choose between more insurance carriers and coverage levels at more competitive prices to help them find the right plan for their own needs.”

According to Starbucks, switching to a plan that better meets individual needs can save employees up to $800 per year and families up to $2,600 per year. However, giving employees more choice can have tradeoffs.

For example, savings typically come in the form of lower premiums for people who select less comprehensive plans – an option most attractive to younger, healthier individuals. However, this can result in adverse selection, where less-healthy people who require more coverage pay increasingly higher costs. While many employees enjoy having more choice, others may feel uncomfortable having to shop for healthcare insurance.

Growth in the private exchange market has been steady, but slower than expected. This could be largely due to the fact that many employers don’t understand the benefits of private exchanges or how they work.

Like the public exchanges established in the Affordable Care Act, a private exchange harnesses collective purchasing power to obtain group coverage. Compliance, regulatory and fiduciary
burdens are shifted from the employer to the private health insurance exchange. Plus, employees can receive personalized assistance with selecting and getting the most from their plans from a team of experts.

When comparing single insurer plans versus insurance exchanges, there are both pros and cons. According to the nonpartisan Employee Benefit Research Institute, it’s too early to tell exactly how private exchanges will affect the U.S. healthcare system.