Trying to capitalize on its massive size, Wal-Mart (WMT), the nations largest retailer is considering starting its own private health insurance exchange. The company is currently exploring the possibility of building health insurance exchange which would allow small businesses to buy healthcare plans for better rates than they could negotiate themselves.
If WalMart is able to work with insurers and managed care providers to come up with a lower-cost option for small businesses, it could be very successful in moving into the health insurance business. Small-business owners have historically had very limited options in providing coverage for their employees, so Walmart would likely be facing limited competition.
WalMart proposed the idea at the Foundation of Associated Industries of Florida’s 2013 Health Care Affordability Summit, and while it admits that it still has not figured out all the details, the company believes that its massive buying power would allow smaller businesses to “piggy back” on Wal-Mart.
For WalMart, this seems like a wise decision. Since it is forced to forced to shop for health insurance plans in all 50 states, it has a wealth of knowledge in how the industry works, and it is smart to leverage its huge infrastructure in such a move. For small business owners, it also seems like this would be a positive thing as well, since they currently have very limited bargaining power in a relatively small market.
As it is now, only large companies are able to use private exchanges for their health care needs. There is a void in the market, and Wal-Mart seems like the perfect company to fill it. Running a health insurance exchange could also allow Walmart to capture a larger chunk of the market for pharmacy services.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va. His articles typically cover big-picture events and forecasting what impact they will have on the stock market. In addition to writing for Fresh Brewed Media, Michael also wrote for AOL's BloggingStocks for three years, focusing most of his attention on the energy and technology sectors. Follow him on Twitter at @MFatMICenter.