Why Walgreen's Offer to Obamacare Enrollees Is Good Business

The company will fill 30-day prescriptions at no upfront cost to ACA enrollees waiting on insurance ID numbers.

Jan 2, 2014 at 1:27PM

Walgreen (NASDAQ:WBA) offered some anxiety relief Monday for people whose ACA enrollments are still in process. In January, the company's pharmacies will fill 30-day prescriptions at no upfront cost for people who have proof of enrollment but haven't received their insurance ID cards or plan ID numbers yet. The offer includes generic and traditional medicines, but not "complex therapy" prescriptions.

More than a million people have signed up through Healthcare.gov, and while they have coverage they don't all have their new insurance cards and plan information from the insurer. Ordinarily, without proof of insurance, it's full-price time at the pharmacy counter. So Walgreen is offering a way to help those people avoid a budget hit while they wait for their ID information.

Three benefits to Walgreen's offer

Civic-minded shine

Amid all the news about Healthcare.gov's difficulties with enrollment (which I've had to deal with myself) and technical glitches, Walgreen's announcement has generated plenty of press. It's a positive in a sea of bad and middling news about the ACA transition. It also—at least for now—sets Walgreen apart from competitors Rite Aid (NYSE:RAD), Target (NYSE:TGT), Wal-Mart (NYSE:WMT), and Costco (NASDAQ: COST), none of whom had announced a similar program when this article was published.

CVS Caremark (NYSE:CVS) announced Tuesday, after the Walgreen's announcement garnered headlines, that its pharmacy staff will help customers navigate the transition and "in some circumstances and based on clinical considerations," offer a 15- or 30-day bridge supply of prescription medicine to ACA enrollees. It's a smart offer, too, but not as comprehensive as Walgreen's.

New traffic

Walgreen's offer should generate new traffic into its stores and some repeat business if those new pharmacy customers stick with Walgreen after January. Changing pharmacies involves overcoming a certain kind of mental inertia—who has time?—so once those new customers are in Walgreen's system, there's a good chance they'll stick around.

The likelihood of loyal customers

Current Walgreen's pharmacy customers who are waiting on new insurance IDs (full disclosure: myself included) will appreciate the gesture. It's one less thing to worry about at refill time, and it also saves customers the hassle of filing for reimbursement from their insurers. New customers who come on board just for the ACA offer will remember it, too, if their transactions go smoothly.

Two possible side effects

Lack of public awareness

Potential customers may not be aware of Walgreen's offer without more of a push. The story's making the media rounds, but as of this morning the Walgreen's homepage and pharmacy pages made no mention of the program. That could translate into less traffic from people who are in the ID gap, and confusion at the pharmacy counter if people don't understand that they need to bring some proof of enrollment as part of the deal.

Slow reimbursement

With as many technical and communications issues as the new health care site has experienced, it wouldn't surprise me at all if payments from insurers to Walgreen for the 30-day supplies take longer than expected. But such delays probably won't hurt Walgreen's bottom line. As fellow Fools Matt Crews and Michael Lewis have noted, the company's sales are strong and have been for a long time.

The prognosis

It's going to take a while to get all the knots worked out of the Affordable Care Act transition, and corporate gestures of goodwill are smart business. Like insurance companies' decision to extend the payment deadline to Jan. 10 for coverage starting on the 1st, Walgreen's 30-day offer is a way to help make the process easier. It will be interesting to see how many people take Walgreen's up on the offer, and to see whether any of Walgreen's competitors will actually match it.

Editor's note: Wal-Mart did, in fact, extend the same offer a day after Walgreen. We regret the error. Additionally, on Jan. 2, grocery chain Kroger also offered a 30-day no-upfront-cost deal.

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Fool contributor Casey Kelly Barton has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale. The Motley Fool owns shares of Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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