In the search for effective solutions to health care, the grocery chain Safeway has adopted a simple, time tested approach: base premiums on behavior. This is the fundamental model of the the auto insurance industry.
In a 6/12/09 WSJ op-ed, Steven Burd, the CEO of Safeway, details Safeway’s four year long experiment with this model. While American companies have average a 38% increase in health care costs since 2005, Safeway costs have remained flat. Like many large companies, Safeway is self-insured, giving them data on actual medical claims turned in by employees.
Employees who don’t engage in risky behavior, like drivers who don’t speed, pay lower premiums than those who do. The program is voluntary at Safeway but most employees rated the plan good to excellent and the participation rate is 74% for non-union employees. Employees who reduce their weight or give up smoking are rewarded with lower monthly premiums. Safeway is currently negotiating with the union to introduce a similar program for union employees.
This year, the Federal government is likely to step in to the health insurance market to attempt to solve problems so seemingly intractable that the private marketplace and the individual states have failed to address them. Older employees become slaves to their employer. On an individual plan, a woman who had breast cancer 10 years ago may pay four times the premium charged an employer for a plan with the same benefits. How many states have high risk health insurance pools as they do for auto insurance? Year after year small employers, patients and lawmakers have acknowledged that the current system is broken. Suggestions are made. Discussions and arguments follow and little is done.
The Federal government has a poor record of solving problems. That there is enough support for a Federal government solution to the problems in health care insurance says more about the failure of the private marketplace and the state legislatures than an endorsement of the Federal government.