The Homa Files

TakeAway: By providing employees with financial incentives to stop smoking, lose weight, and control cholesterol levels and blood pressure … Safeway has contained healthcare spending over the past couple of years. 

The principle: reward good behavior … and don’t subsidize bad behavior.

Ken’s Take: Maybe fat folks should pay higher airfares and health insurance premiums.  Hmmm.

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Excerpted from WSJ, “How Safeway Is Cutting Health-Care Costs”, June 12, 2009 

Effective health-care reform must meet two objectives: 1) It must secure coverage for all Americans, and 2) it must dramatically lower the cost of health care.

At Safeway we believe that well-designed health-care reform, utilizing market-based solutions, can ultimately reduce our nation’s health-care bill by 40%. The key to achieving these savings is health-care plans that reward healthy behavior.

Safeway’s plan capitalizes on two key insights: (1) 70% of all health-care costs are the direct result of behavior; (2) 74% of all costs are confined to four chronic conditions — cardiovascular disease, cancer, diabetes and obesity … and, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.

Safeway has done nothing more than borrow from the well-tested automobile insurance model. For decades, driving behavior has been correlated with accident risk and has therefore translated into premium differences among drivers. Bad driver premiums are not subsidized by the good driver premiums.

As with most employers, Safeway’s employees pay a portion of their own health care through premiums, co-pays and deductibles. The big difference between Safeway and most employers is that we have pronounced differences in premiums that reflect each covered member’s behaviors.  Currently we are focused on tobacco usage, healthy weight, blood pressure and cholesterol levels. Employees are tested for the four measures cited above and receive premium discounts off a “base level” premium for each test they pass. If they pass all four tests, annual premiums are reduced $780 for individuals and $1,560 for families.

At Safeway, we are building a culture of health and fitness.

While comprehensive health-care reform needs to address a number of other key issues, we believe that personal responsibility and financial incentives are the path to a healthier America. By our calculation, if the nation had adopted our approach in 2005, the nation’s direct health-care bill would be $550 billion less than it is today.

Full article:
http://online.wsj.com/article/SB124476804026308603.html#mod=djemEditorialPage

This entry was posted on June 19, 2009 at 7:45 am and is filed under Health Care / Medical Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.