While other companies have seen their chunk of healthcare costs increase at a brisk rate in recent years, Safeway has kept its healthcare costs steady since 2005. The main reason for this, says Safeway CEO Steven Burd in this Reuters article, has been the company’s focus on healthy lifestyle choices.
I have no idea where Burd gets the statistic quoted at the top of this post or how accurate that number is. But he is saying is that the vast majority of health costs are directly tied to lifestyle choices. Safeway has capitalized on this by offering an insurance discount to employees that make healthy choices that the company promotes. Those choices include maintaining a healthy weight and not smoking.
Each year employees that participate in Safeway’s health plan receive a score based on their health choices. “[T]hose who score the lowest pay 51 percent more for health insurance premiums than those who score perfectly,” says Burd. He also says that the company has incurred no additional expenses to implement this plan.
The Health Care Blog’s interview with Safeway Sr. VP Ken Shachmut goes into much greater detail about the company’s health initiative. Shachmut calls the company’s health insurance system “market-based health care.” He says, “Our basic premise was that if people were given responsibility for their decisions, and there was transparency to the financial consequences to those decision (both good and bad, mind you!), that they would choose to maximize both their health and their financial benefit.”
Shachmut says that implementing this plan not only slowed the growth of health care costs, it “reduced all-in per capita healthcare spending 13%.” This allowed the company to cut the insurance cost for employees “by 25% or more. … These new plans introduce mutual benefits - by controlling costs, improving outcomes, and helping to leave more money into our employees’ pockets through encouraging healthy choices.”
This sounds interesting, but doesn’t it seem a bit coercive? Shachmut says:
“I want to be clear - we were adamant about designing this program to cover only those things for which our employees had control and which were clearly behavioral in nature. We do not differentiate for genetics, and we did everything prospectively and transparently so that everyone had equal opportunity to improve their behaviors. And, where there are special circumstances documented by a physician, we authorize exceptions.”Among the accountability included in the plan are annual tests for “weight, tobacco, blood pressure, and cholesterol.” Nagging people about health choices doesn’t work, says Shachmut. But people are driven by their wallets. By demonstrating healthy choices, an employee using the family option can save “almost $1,600” per year in insurance costs. The company also offers a number of benefits designed to enhance health, including “discounted gym memberships” and full coverage for preventative care.
On top of this, Safeway is working to identify good providers, based on “price, outcome, satisfaction, etc,” and get this information out to employees. Shachmut says, “Healthcare is a complex topic and there is no one “silver bullet” – but full transparency on cost and quality comes close.”
It seems from the Shachmut interview that Safeway would prefer to move away from the “employer based insurance system that we have inherited is an accident of history from the WWII era.” But executives realize that this would require a revolutionary change that is beyond their control. So they have decided to make the best of the situation they have. “There is no need to wait for government action,” says Shachmut. Still, the company advocates the following reforms:
- Market-based healthcare system.
- Universal coverage with individual responsibility.
- Financial assistance for the low-income.
- Healthier behavior and incentives.
- Equal tax treatment.
Shachmut’s math appears to have discounted one of the main features that makes Safeway’s plan work: individual choice. Safeway employees apparently have some choice in whether to participate in this plan. About 30% of non-union employees and 70% of union employees don’t participate in the accountability plan. Aside from this, does anyone know how many employees have chosen to leave the company and work elsewhere rather than submit to the requirements of the plan?
How much different would the health and cost outcomes be if all Safeway employees were forced to participate in the plan, they had no choice but to work for Safeway, and Safeway couldn’t fire anyone? What if the company were required to cover a proportionate number of the currently uninsured population to boot? That is effectively what Shachmut is suggesting when he pushes for universal coverage.
Under universal coverage, no one could opt out of the plan, as a significant number of Safeway employees currently do. No one could choose to leave the plan without emigrating outside of the country. Plan providers would have to cover everyone, regardless of how bad their health choices were.
Many of those making the worst choices are also the ones that could least afford to pay for coverage. So even if you raised their rates through the roof, those high rates would necessarily be subsidized by others that actually pay. The poor that make bad choices wouldn’t actually pay more, so they wouldn’t actually be incentivized to make healthy choices. On the contrary, their poor choices would be subsidized, providing additional incentive to make bad choices. Moreover, this means that rates for the responsible would be much higher than for current responsible Safeway employees.
Beyond this, it must be recognized that Safeway commands only a smidgen of the healthcare market, even in the area of its corporate office. What would costs and outcomes be like if Safeway commanded the entire healthcare market in the region and if Safeway were instead a political entity? It would effectively dictate uniform pricing and even treatment details. As the company controlled more healthcare details, healthcare professionals would lobby the regime for more beneficial conditions. A different breed of ‘paint-by-the numbers’ provider would become the norm.
Removing choice in the name of compassion cannot and will not produce the kinds of health benefits and cost savings that Safeway is currently experiencing with its healthcare plan, even if all of the elements Mr. Shachmut touts were to somehow miraculously pass political muster to become part of a national universal healthcare plan.
Safeway has apparently achieved some wonderful and noteworthy results with its healthcare initiatives. We’re not just talking cost; we’re talking about longer life and a better quality of life for many of its employees. But it is foolish to assume that these same benefits will be realized on a broad scale with universal healthcare coverage. Safeway has actual personal choice on its side. Regardless of the kinds of ‘market based’ elements employed, no universal coverage plan can obtain the benefits of personal choice.