Sam's Club, the discount, bulk-sale arm of the Wal-Mart corporate empire, in partnership with insurance company Extend Benefits Group LLC, began offering health insurance programs to small businesses nationwide Jan. 4.
ExtendChoice, the name of the venture, is a contribution health care program that allows small-business owners - who constitute most of Sam's Club's customers - to provide their employees with money to purchase individual insurance plans, according to a Sam's Club press release.
This new approach to small-business health care would lower costs by individualizing the health insurance programs, said Mark Goodman, Sam's Club vice-president of marketing, membership and e-commerce, in the release.
The response has been amazing so far
said Olan James, a spokesman for Sam's Club, although he was unable to release specific numbers.
The move is a logical extension of the Wal-Mart franchise, said Richard Vedder, a distinguished professor of economics at Ohio University.
Times change and they see an opportunity he said. Insurance is open for grabs.
The ExtendChoice plan will appeal to small businesses because it will offer specialized plans that other insurance providers give only to larger companies, Vedder said. Insurance is a pooling operation; you have to diversify the risks he said.
Extend Benefits Group is an insurance brokerage firm headquartered in Salt Lake City - the same city in which Wal-Mart plans to open a bank to process credit card transactions, something James said was purely coincidental.
Sam's Club will almost be acting as an HMO of sorts
said Nu Wexler, a spokesman for the group Wal-Mart Watch. It's ironic that a company that covers less than half of its own employees with a health care plan is making money by insuring employees of other companies.
Congress passed the Gramm-Leach-Bliley Act in 1999, which allowed the banking industry and the insurance industry to co-mingle, said Robert Denhard, a spokesman for the Ohio Department of Insurance. Since then, banks and other corporations have opted to sell insurance plans.
Although not available to Midwesterners, Costco, one of Sam's Club's largest rivals, also has begun selling health insurance to small businesses in the Pacific Northwest and Hawaii.
Why not sell insurance? Small businesses need insurance
and they're going to Sam's Club anyway
Vedder said. I'm not a (Wal-Mart) stockholder
but if I were
I'd be applauding it.
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