Walgreens to Enter Health Insurance Business

Discussion
Aug 10, 2011
George Anderson

In an interview last year with Crain’s Chicago Business, Walgreens CEO Greg Wasson said the company supported “the three core tenets of health care reform: improved quality, greater access to care and lower cost.”

With more than 7700 drugstores and 350 Take Care Clinics across the country, it is widely believed that Walgreens will be one of the major beneficiaries of federal health care legislation as millions more become covered by health insurance.

Now, according to a CNNMoney.com report, Walgreens is looking to take further advantage of the opportunity by offering health insurance plans through a private exchange.

Part of the new law is the creation of federal and state health exchanges by 2014 to offer subsidized insurance for those without insurance or not enough.

“For retailers, [creating a private insurance exchange] is a way to generate more revenue from a new business,” Chris Hoffman, chief marketing officer at the investment banking firm TripleTree, told CNNMoney.

“Those companies that get their exchanges up and running before 2014 could also succeed in stealing customers away from the public exchanges,” he said.

According to TripleTree, 36 million people will buy health insurance through exchanges between 2014 and 2019. Walgreens has remained mum on whether it is getting into the health insurance business as reported.

“As always, we’re looking at a number of options in light of health care reform as we continue to seek ways to help our customers better navigate today’s health care system,” a Walgreens spokesman told CNNMoney.

Discussion Questions: What do you think of Walgreens and other retailers offering health insurance to customers? Are there other new businesses and opportunities that federal health care legislation will open up for retailers?

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15 Comments on "Walgreens to Enter Health Insurance Business"


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Dick Seesel
Guest
9 years 8 months ago

I have mixed feelings about this, assuming Walgreens wants to provide a “portal” for consumers to shop from providers like Aetna and Humana rather than underwriting policies itself. On the one hand, this move would strengthen Walgreens’ reach into all things health-care related (along with its acquisition of drugstore.com earlier this year). On the other hand, Walgreens still has a lot of work to do in order to bring greater health-related focus to its brick-and-mortar stores. (Not to mention, making the sorts of physical upgrades you can see at remodeled Duane Reade locations in Manhattan.) Will insurance be a distraction or a reinforcement of the mission?

Gene Hoffman
Guest
Gene Hoffman
9 years 8 months ago

Offering health insurance will give Walgreens an additional opportunity to go for more evergreen. So they will go for it and other retailers will follow.

Now turn that coin over. While legislation will open up health care for 30 million more people, the doctor population will remain rather static at 700 thousand. That’s a large squeeze on the medical profession and could increase insurance costs, which would be passed on. In those uncharted waters, what will be the future impact be on consumers and retail hiring practices?

Jonathan Marek
Guest
9 years 8 months ago

Retailers, including Walgreens, have taken great strides to be lean in how they operate while successfully delivering a broad range of products and solutions to consumers. They are also leaders in deploying IT to help make their processes efficient. If more of that retail mindset and business model can make it into the US healthcare system, including components like insurance that are full of broken processes today, it will be a boon for the retailers and for patients.

George Anderson
Guest
9 years 8 months ago

Gene makes a good point re: doctors. That in itself points to another opportunity for Walgreens and others as pharmacists and nurse practitioners take over duties that MDs currently handle, but can be done just as well by others at a lower pay grade.

Roger Saunders
Guest
9 years 8 months ago

Sometimes you find growth in ancillary businesses that appear to be tied to your core. Sometimes, it’s best to “Stick to the Knitting.”

Trying to navigate the “Health Exchanges” that COULD evolve, will likely cause Walgreens the same headaches they suffered through in trying to build out WAGS Restaurants. Stick to the knitting.

Warren Thayer
Guest
9 years 8 months ago

The medical arena looks risky and volatile over the next few years for more reasons than can be said here. I’m always in favor of more competition, however, and wish Walgreens well. It surely won’t be a slam-dunk, and political vagaries can turn this upside down quickly.

Ryan Mathews
Guest
9 years 8 months ago

First of all — as this demonstrates — it wasn’t a health care reform bill, it was a health insurance reform act.

Walgreens has a tradition of getting ahead of the pack when it comes to testing new opportunities so it’s not surprising that they are the first to go down this road.

The real questions are: (1) Will consumers accept the idea of being insured by non-traditional insurers?; (2) Will Walgreens be able to afford the cost of the program if it gains widespread popularity?; and (3) Will the act stand as written?

A cynical fourth question might be, “Does anyone actually know the new law well enough to craft an offering around it?” but I’ll let that one pass.

Tony Orlando
Guest
9 years 8 months ago

It’s important who’s going to service the policy, as I have many questions on coverage for my family all the time. If you take it out of the hands of my agent, then the Geico lizard might as well sell it. A great agent still means something to me, and outside of basic needs, which may be the policy Walgreens wants to sell, I’ll stick with my agent.

Roy White
Guest
Roy White
9 years 8 months ago

From a Walgreen point of view, it’s another example of their aggressive stance in providing all types of healthcare services, with Dr. On Premises in the Duane Reade division being one of the latest. Offering health insurance is going to the next level and there is no reason that a drug store, particularly one that characterizes itself as a prescription specialist, cannot offer health insurance. For many years, Walgreen tended to be a follower in the healthcare services, trailing other major competitors, and offering health insurance is part of a “new,” proactive Walgreen. Moreover, if ever there were a way to lock healthcare customers in, this would appear to be one of them, and Walgreens should be lauded for making this move if the retailer goes ahead with it. From a societal point of view, anything, repeat anything, that introduces an element of competition in the health insurance market should be supported to the absolute fullest.

Camille P. Schuster, PhD.
Guest
9 years 8 months ago

The new law appears to have enough ambiguity to allow for new forms of delivery, insurance, and coverage. There is likely to be experimentation during the implementation phase. Walgreens has been experimenting already so we can expect to see more experimentation from them in the future. This is only the beginning of the experimentation we will see from Walgreens, traditional insurers and other entities.

Gene Detroyer
Guest
9 years 8 months ago
My first and very cynical opinion is that this will never happen. There is a lot of time until these parts of the law take effect and the powers of the health insurance industry will do all they can in Washington to prevent competition. Health insurance companies do what companies should do. They charge as much as they can get away with and pay out as little as they can. Their business is not healthcare. They are not in the business of taking care of America’s healthcare needs. That is not a critique. That is absolutely the way they should operate. The only thing that is going to change that is competition. Unbelievably, in little Switzerland there are over 300 health insurance companies. In the U.S. there is a fraction of that. I applaud Walgreens from a business point of view. There is great opportunity in health insurance. There is great margin in the business structure. Walgreens is well positioned to take advantage of the situation. I have never been a big fan of Walgreens… Read more »
M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
9 years 8 months ago

Over thirty states have challenged the constitutionality of a core element of Obamacare on the basis that the government can’t force us to buy something we don’t want–such as health insurance. It is now generally predicted–based on early court decisions–that the Supreme Court will support this challenge when the argument is presented to them. A successful constitutional challenge to forced purchases could very possibly be the demise of the Jenga tower of Obamacare.

Then everything changes again, and I believe Walgreens is prepping for that eventuality. Back to the old ways vis-a-vis health insurance providers, but with a new major player who can eliminate the costs of third party services which traditionally control billing between pharmacy suppliers and government support agencies that subsidize payments (Medicare, Medicaid). It’s a no-brainer.

Kai Clarke
Guest
9 years 8 months ago

This is a great move for Walgreens. They can subsidize future purchases through the insurance exchange and incentivize their customers to return to the store over and over again to maximize their bounce back coupons, savings promotions, etc.

Tim Henderson
Guest
Tim Henderson
9 years 8 months ago

This seems yet another symptom of the same illness we discussed last week in regards to retail health clinics, i.e., too many consumers lack access to quality, affordable healthcare, and how today’s consumers view healthcare has greatly changed from yesteryear’s traditional physician-guided healthcare to one where consumers are taking greater control of managing their healthcare.

That being the case, if Walgreens does debut health insurance (and without seeing all the details of the offering), then it’s a solution that’s likely to be welcomed by the uninsured and underinsured. It’s a smart move by a brand that consumers already trust for key parts of their healthcare, including prescriptions, OTC meds, pharmacist advice, in-store clinics, flu shots, etc. Consumers need healthcare, but too many can’t afford it. If retailers can successfully fill the gap with a viable offering, then it’s a win for merchants and consumers.

Ed Rosenbaum
Guest
9 years 8 months ago

Roger makes a strong point. I always said “stick with what brings you to the table.” That is where the bread is buttered. But health care is one of those ‘sister businesses” that tend to be part of the overall core of the Walgreens-type businesses. That brings me to Tony’s point. I just don’t see the clerk at Walgreens being able to answer my policy questions. Yes, that’s a stretch; but you get my point.

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