Sears plans to overhaul health insurance, offering cash instead of plan

Sears Holdings Corp., in an effort to control its healthcare costs, has joined a private insurance exchange and will provide employees with a fixed allowance to buy insurance.

The retailer, which has more than 90,000 workers eligible for coverage, becomes one of the largest U.S. employers to move away from traditional defined benefit health plans in favor of an approach that effectively shifts the choice of health insurance from companies to workers.

Sears said it was optimistic that more choice and competition would drive down healthcare costs.

“The corporate exchange model brings increased flexibility to group health coverage for our associates, giving participants a chance to choose both the level of coverage and the insurance company that best meets their needs,” Sears spokesman Chris Braithwaite said in a statement.

But serious questions about the company’s new arrangement remain to be answered.

The company declined to provide any specifics about the economics of its strategy. It is unknown how much money employees would receive to buy health insurance and whether contribution levels would increase if premiums in the exchange increase.

Sears employees will have to choose among different health plans and insurance carriers starting with open enrollment this fall.

The Wall Street Journal first reported the news of the new insurance approach, which is also being followed by Darden Restaurants.

Sachdev writes for the Chicago Tribune.