Walgreens expected to announce health care switch to private plans

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Joe Raedle

(CBS News) Drugstore giant Walgreens is expected to announce Wednesday that it will move 160,000 thousand workers to private health care plans. It's one of the largest employers to make that switch.

The move would be a switch to a fixed amount of money designated for each employee for health care. The change -- like those in recent months at Sears, Darden Restaurants, IBM, Time Warner -- is to protect the company against rising costs in the future. The health care plan transition also relieves the company of some of the compliance issues that health care comes with on the corporate side.

CBS News business analyst Jill Schlesinger said on "CBS This Morning," "I can't see how this is going to be good for the employee in the future. Yesterday we got a (Congressional Budget Office) report that shows health care costs are going to escalate pretty dramatically in the future over the next two decades. And that means that if you're only getting a fixed cost today to cover a certain amount of insurance, what happens when things rise in the future? You're still getting that same fixed dollar amount so health insurance will be more expensive for you."

So why are companies doing this? Is the Affordable Care Act -- commonly known as Obamacare -- to blame, as critics claim?

"It's hard to know whether the company is doing this because of health care reform or whether it's a nice excuse," Schlesinger said. "It's great coverage. It shifts the burden to employees in the future. And we don't know that right now."

Some people opposed to the health care reform argue that it's better and more efficient to let people decide how they're going to spend their health care money. But Schlesinger draws comparisons to the origins of the 401(k) plan: "That's what companies told us back in the '80s -- they said its better to control your own retirement," she said. "In the end, what we know is a fixed pension that was paid for and funded by a company where the company took on the risk was a far better model for employees than funding a 401(k) ourselves and assuming investment risk.

Schlesinger added, "I think that there's 30 years of data that prove pensions would have been a much better plan for employees but a 401(k) was much better for employers."

For more with Schlesinger, watch her full analysis above.