Safeway’s Health Care Prescription

By June 15, 2009Commentary

Safeway Inc. has received a great deal attention around its health care plan and apparent cost savings.  The company and its CEO, Steven Burd, have broadcast their views on how to successfully control costs widely, most recently in a Wall Street Journal oped piece.  (WSJ OpEd) The essence of the plan is putting employees and their dependents directly at financial risk for improvements in certain key health-related behaviors.  The editorial says that the company believed 70% of health costs were related to behavior that could be controlled, particularly in four key disease areas—cardiovascular, diabetes, obesity and cancer.  So the company created a voluntary plan whereby employees are tested on certain screening measures related to these diseases and receive premium reductions if they show good control or improvement.

Safeway says that in the past four years its per capita health care costs, including employer and employee share, have been flat during a time when most employers’ expense has gone up 38%.  The company says it could do even more if current laws were changed to allow them to provide greater incentives and if it can successfully engage its union work force in the effort.

Without detailed analysis it is difficult to assess either the health status of Safeway’s employees or the cost savings of Safeway’s effort, but it appears to have been highly successful on both counts.  A concern would be whether employees and their dependents are putting off necessary care, but the design of the plan appears to base savings to the employee solely on certain test results and health–related behaviors, not on how much health care they utilize.  What the plan does indicate is the need to give individuals positive or negative incentives for the consequences of their health behaviors and status.  A reform measure that varies cost based on behavior might achieve significant savings.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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