Thursday, April 12, 2007

Safeway Takes on Health Care

Anyone interested in the future of health care should take a few minutes to read the Q&A on with Safeway CEO Steve Burd. ( During the past couple of years, the California-based supermarket operator has taken a leadership role in health care reform, advocating disease prevention and behavior modification or lifestyle changes as key to reduced costs.

Safeway, which operates 1,761 stores in the United States and Canada, got involved in the issue out of necessity. Its health-care costs for employees reached $1 billion and were exceeding the chain’s net income by about 20%. Backed by research that 50% to 70% of health-care costs are driven by people’s behaviors, the chain redesigned its health plan to reward people for healthful behaviors, including receiving an annual physical, regular mammograms and a colonoscopy. The results have been impressive.

“We saved 15% of our health-care costs the first year, flattened our costs the second year and rewarded our employees with a premium reduction of 25 to 34%,” Burd said.

In the Safeway plan, each employee’s premium fluctuates with his or her personal behavior.
“We’re paying for 100% of preventive care,” Burd said. “But if you don’t take advantage of that, then your premium will go up.”

In the first year of the redesigned plan, about 45% of Safeway’s eligible employees signed up. In the second year, it was 71%. Employees have an alternative plan to chose from, an HMO, whose cost rose last year.

Critics say that Burd is mostly (only) interested in lowering Safeway’s costs and improving its bottom-line. But Burd’s basic belief—that prevention is more cost-effective than managed care because it addresses the fundamental causes of illness—makes sense. And if, by improving the health of the chain’s employees, he also helps its bottom-line, that’s fine by me.

Marianne Wilson

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