Starbucks Widens Workers' Health-Insurance Options
July 18 2016 - 11:29AM
Dow Jones News
By Julie Jargon and Anna Wilde Mathews
Starbucks Corp. said it would be offering employees new
health-insurance choices as part of an effort to make the coffee
chain a more attractive employer.
The company on Monday is expected to announce details of a plan
to offer U.S. employees who work 20 hours or more a week the chance
to shop for health insurance on a private exchange.
Instead of the one health insurer and three medical coverage
levels they have now, employees from Chief Executive Howard Schultz
to store baristas will be able to choose from up to six national
and regional carriers, and five levels of medical plans, starting
Oct. 1.
Private exchanges, which are essentially online marketplaces
where employers can have workers choose health plans, haven't
caught on as quickly as insurers once expected. Consulting firm
Accenture PLC once estimated that 40 million Americans would be
getting insurance through private exchanges by 2020, but only about
eight million people are on such exchanges now.
The move by Starbucks comes as retailers are facing a tight
labor market and various state and local minimum-wage
increases.
Last week, the company said it would raise wages for all U.S.
store employees by at least 5% starting Oct. 3 and double the
annual stock award for Starbucks employees who have worked for the
company for two consecutive years. Starbucks employs roughly
157,000 people in the U.S., but doesn't break down how many work 20
hours a week or more.
Starbucks wouldn't disclose its employee turnover rate. Ron
Crawford, Starbucks vice president of global benefits, said
offering more insurance options eliminates a concern employees
often have about switching jobs and losing the health coverage they
were used to. "People intuitively like choice," he said.
Other restaurant companies have beefed up efforts to attract and
retain workers.
Last year, before Chipotle Mexican Grill Inc. experienced a
series of food-safety problems, it hired 4,000 new employees during
a one-day event and expanded college-tuition reimbursement to all
hourly workers, added paid sick days and increased the amount of
paid vacation it offers. McDonald's Corp. and Cheesecake Factory
Inc. raised employee wages last year.
Private exchanges can be beneficial to employees, said Paul
Fronstin, director of health research at the nonprofit Employee
Benefit Research Institute.
"The traditional model is your employer picked your insurance
and you could take it or leave it," he said.
The ultimate impact on employees may depend on the way their
employer structures its benefits. Generally, the employer gives
employees a set sum of money that they can apply toward their
insurance and if they choose a pricier plan, they pay more out of
their own pocket for the coverage.
But if employers don't ramp up the sums they contribute each
year as health coverage gets more expensive, employees can find
themselves paying out more.
Starbucks, which has historically paid 70% of the cost of a
relatively rich plan, said it has always adjusted its contribution
upward as health-care costs have risen, and that it will continue
to do so.
Mr. Crawford said Starbucks doesn't expect to save any money by
switching to the exchange operated by consulting firm Aon Hewitt, a
unit of Aon PLC.
"In fact we've structured it so that we won't," he said.
The company's standard and most commonly used "silver" plan,
which carries a relatively low deductible, will remain much the
same and continue to cost single employees $27 a paycheck and
employees with families $153 a paycheck.
The company is adding a slightly richer lower-tier plan called
"bronze-plus" as well as a more expensive "platinum" option.
Still, when employees are presented with a number of options,
many, particularly those who are younger, healthier and have lower
incomes, tend to opt for plans with relatively inexpensive monthly
costs and higher out-of-pocket bills when they need care.
Write to Julie Jargon at julie.jargon@wsj.com and Anna Wilde
Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
July 18, 2016 11:14 ET (15:14 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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