The announcement this week by retail giant Sears Holdings and food industry giant Darden Restaurants, that they are discontinuing their traditional group health benefit plans for their employees, is a significant event in the overhaul of America’s ailing approach to delivering healthcare.
Both companies announced they would begin giving their employees an annual allowance to purchase health coverage on the open market. Both companies denied they were trying to shift costs, rather they said this approach will facilitate individual ownership and financial accountability which would drive down overall costs.
“It is a fundamental change…the employer is saying, ‘Here’s a pot of cash, go shop,’ “ said Paul Fronstein, director of research at the Employee Benefit Research Institute. Mr. Fronstein was quoted by the Wall Street Journal in their story.
“It puts the choice in the employee’s hands to buy up or buy down,” said Darden Senior Vice President Danielle Kirgan, according to the WSJ story.
These two companies are not the first to try this approach, but they are the first two big organizations to test this concept in the post-Affordable Care Act environment where deficit reduction will drive down reimbursement for Medicare and, eventually, what the group health plans are willing to pay for care.
Remember this day. It is the first day—and the first major step—in a market-driven approach to the transformation of the healthcare delivery business model as we know it.