Walgreen Company (NYSE:WAG) has asked its employees to shift to private health insurance exchanges, the company announced Wednesday. Walgreen Company (NYSE:WAG) has a total workforce of 240,000, and 60,000 of them are ineligible for health insurance mainly because they work part-time. Among the remaining 180,000, about 40,000 chose coverage for their family members while another 120,000 opted for their own coverage, reports Beth Pinsker of Reuters


Walgreen follows IBM and Time Warner

Increasing healthcare costs have prompted large corporations to revisit their agreements of providing medical benefits to employees. Time Warner Inc (NYSE:TWX) and International Business Machines Corp. (NYSE:IBM) have announced to move retirees to private marketplaces from the company-administered plans. Last Month, United Parcel Service Inc. (NYSE:UPS) said that it will terminate the healthcare benefits for about 15,000 spouses of its workers because they are covered under their own employers’ plans, report Timothy Martin and Christopher Weaver of The Wall Street Journal.

Walgreen Company (NYSE:WAG) said that rising healthcare costs and compliance-related expenses related to the Affordable Care Act were the main reasons behind the move. It will give employees more options and control over their coverage. But the employers usually pay a fixed amount in a lump sum, so employees may have to bear a greater burden if costs go up.

Walgreen’s new arrangement to take effect in 2014

The private exchange model is growing rapidly after of the Affordable Care Act because low income people can get federal subsidies to buy health insurance. Large corporations say the health law has prompted the trend of shifting to private health exchanges. But some experts argue that companies are using it as a cover to hide their adjustments that may not be popular with employees.

Walgreen Company (NYSE:WAG) said its new arrangement will become effective in 2014. The drugstore giant will pay a fixed sum on the coverage options selected by employees. For this, Walgreen Company (NYSE:WAG) has tied up with Aon Hewitt’s private insurance exchange. Employees will have as many as 25 different options. The lowest premium would cost $5 per month, which will attract workers that are still single.

Walgreen Company (NYSE:WAG) shares were almost unchanged at $54.88 at 11:25 AM EDT.