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A Business Case to Tackle Obesity

In the grocery business, volume counts. Profit margins of mere pennies comprise the bottom line, and so health care costs rising at nearly double-digit inflation rates threaten to undermine the grocer’s business model.

Hence, one of the nation’s largest supermarket chief executive officers has his sights set on reducing rates of obesity among his 200,000 employees.

Safeway CEO Steve Burd looked at the numbers and concluded obesity is the root of a majority of his company’s health care costs. The way he sees it, chronic conditions, such as heart disease, diabetes and cancer, are his primary cost drivers. Obesity is behind them all.

Relying on his steadfast belief in the efficiency of markets, Burd led his self-insured company in 2005 to create a health plan that puts healthy behavior incentives squarely in front of his employees.

In the three years since, Safeway’s health costs increased only a half a percentage point, Burd told an audience of hundreds of health services and policy researchers last week in Washington D.C. In that time, most businesses have experienced about 16 percent increases in family premiums.

Burd also believes that later this year, he’ll be able to show that the average Safeway employee’s BMI is lower than the national average. About two thirds of U.S. adults are overweight or obese.

To many, Safeway’s plan may seem punitive and unfair. Burd, however, insists that he’s instituting a culture of wellness and prevention, while making people responsible for their behaviors.

“When consumers bear the costs, they’re motivated,” Burd said. “It’s not intended to be punitive; it’s intended to encourage healthy behavior.”

Each year, Safeway employees have their BMI, blood pressure and cholesterol measured. They also take a test to see if they smoke. Their word isn’t good enough.

The difference in premiums between employees who are overweight and smoke and those who aren’t is roughly $1,500. The employee pays that difference. If they quit smoking and lose 10 percent of their body weight, Safeway will pay them back the difference at the end of the year.

Safeway doesn’t expect employees to do it alone, Burd said. Insurance pays 100 percent of the costs for preventive health services like annual physicals and well child visits. The company offers free smoking cessation help, nutrition counseling and gym memberships.

Burd wants to see if his model will scale. He challenged 30 large, self-insured businesses to replicate the Safeway model. Another dozen major food and beverage distribution companies have joined a coalition to reverse obesity trends.

Burd has also taken his plan to Capitol Hill. In the photo at top, he’s with Sen. Ron Wyden (D-Oreg.) promoting the Healthy Americans Act.

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Byron MccravytheowandaTheaKevin Hignett Recent comment authors
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Byron Mccravy
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Byron Mccravy

Great blog! Sorry to get off subject, but since Nashville is getting a lot of press lately, I’d like to find a great sushi restaurant or Japanese restaurant in Nashville TN. Have you read any recent buzz? There’s a new one called Nomzilla Sushi Et Cetera, but I’ve only seen a few reviews. Here’s the address of this new Nashville Japanese Restaurant, 1201 Villa Place, Suite 101 Nashville, TN 37212 – (615) 268-1424. Let me know your thoughts! Thanks!

theo
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theo

What a joke, Burd is so superior! Sure he’s concerned about his employees health..Is that why he has come up with a surcharge of over 200.00 a week if your spouse is self-employed and has no access to health ins. for 2010? I have been w/ the co. for over 30 years and have never seen such a “screwing” of the employees as I see coming up in the year 2010. He also took Kaiser away from us and now we have to endure $2000.00 out of pocket before we even get to be reimbursed for any medical visit, WHAT… Read more »

wanda
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wanda

I work at Safeway, and correct me if I’m wrong, but I was not offered this great deal. What I heard is that only UPPER MANAGEMENT gets the free gym, and the money back. Screw the rest of us.

Thea
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Thea

Simply thought on this topic from one workers’ point of view.. I think it’s good to want to change this trend but (Steve Burd or Safeway) going to pay 100% of gastric bypass surgeries if employees want this? (Steve Burd or Safeway) Going to change the marking of high fat, high sugar, highly proccessed food and 80% of the fried food they serve in the deli? (Steve Burd or Safeway) going to set better schedules to be able to go to gyms and more time for better eating habits?(trying having 30 min.to buy lunch,make lunch get though lines ect. At… Read more »

Kevin Hignett
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The Safeway example is a good one and I’m glad it’s being discussed in a public forum. I’m blown away by their .5% cost increase. That is almost unheard of, even in self-funded groups. And everyone in the company benefits from that. Wellrounded – I understand your concern, but the Safeway employees are being helped tremendously by the company’s efforts. If they participate and lose 10% of their body weight, will they be angry? I imagine the Safeway employees who participated in the program are healthier and happier now. The genetic role in obesity is greatly exaggerated and if someone… Read more »

Dan
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Dan

Thoughts about Obesity Obesity has been defined as when excess body fat accumulates in one to where their physical overgrowth makes the person unhealthy to varying degrees. Obesity is different than being overweight, as others determine obesity to be of a more serious concern. As measured by one’s body mass index (BMI), one’s BMI of 25 to 30 kg/m is considered overweight. If their BMI is 30 to 35 kg/m, they are class I obese, 35 to 40 BMI would be class II obese, and any BMI above 40 is class III obesity. Presently, with obesity affecting children progressively more,… Read more »

Deron S.
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Here’s an interesting article that supports what we’ve been discussing:
http://www.medpagetoday.com/Columns/12821

Deron S.
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Peter – I think all of the things you mentioned should be considered.
wellrounded – A good plan doesn’t look at BMI alone. You have to look at % body fat, cholesterol levels, and other measures to get a true picture.
I don’t disagree that genetics can play a role, but it doesn’t explain the increasing incidence of obesity in the population. My guess is that that environmental and behavioral factors play a bigger part. All factors must be looked at and addressed if we’re going to stop the disturbing trends out there.

wellroundedtype2
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We know that the ability to become obese is not equally distributed across the population. There is a strong genetic component that is influenced by environmental and behavioral factors. I need more details before I become completely livid here, but how on earth does penalizing people who are at higher risk for health problems and greater health care costs to begin with — and reimbursing them only if they’ve lost 10% of their body weight within a year — do anything other than “thin the herd” of one particular business? Are they trying to make sure that none of their… Read more »

Peter
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Peter

“particularly if the approach is multi-faceted.”
Would that include a calorie tax? Would that include mandatory calorie listings on take-out/restaurant/super-market food? Would that include removing subsidies for corn/wheat/soybeans (corn also side subsidizes meat) and transfer the subsidies to fresh fruit and vegetables? Would that include banning junk food advertizing to children?

Deron S.
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Sarah – This conversation is one of the most important ones I’ve seen on THCG in quite some time. This is where the focus needs to be. If we devote a significant portion of our resources to this initiative, we will see great returns. There are a lot of naysayers who feel that the American public will never change. I disagree, particularly if the approach is multi-faceted.

Sarah Arnquist
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Sarah Arnquist

Thanks everyone for the comments. This is a good discussion. let’s see if we can keep it going. Per the discussion on Safeway employees’ demographics, though many stores may be in the moderate climate, California’s obesity rates are no lower than the rest of the nation. Also, maybe Safeway’s employees are younger, but many also probably fall in the bottom quartile of education and income — two well-known risk factors for obesity. I think the Safeway case is interesting because it shows that tackling the obesity problem isn’t just a matter of concern to public health people. Businesses should care… Read more »

Deron S.
Guest

Barry – I think you make some good points, but I don’t think we can use demographics as excuses. It just requires a different approach. Every attempt at reducing obesity and promoting healthy lifestyles that I’ve seen in my lifetime has been incremental/half-hearted. I think our chronic illness problem is serious enough that we need to attack it vigourously and from every angle, including education, food company regulation, taxation, other monetary incentives/penalties to promote desired behaviors, etc. I can’t imagine anyone wants to be obese or unhealthy. The goal will be to get to the true source(s) of the problem.… Read more »

Peter
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Peter

“By contrast, candy, ice cream, soda, pizza and the like, when consumed in moderation, are not harmful.”
If you eat them in moderation you will only be taxed in moderation.

Barry Carol
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Barry Carol

While I applaud Steve Burd’s efforts to reduce Safeway’s healthcare costs by creating financial incentives that will drive employees to improve their health or penalize them with higher insurance premiums if they don’t, I’m not sure how well it will scale. I suspect that his workforce is younger than average while many of Safeway’s stores are in California which has a more temperate climate and outdoor lifestyles are more prevalent. The age and demographic profile of the workforce is very different in old line industries like autos, steel, aerospace, tire and rubber, etc. The government sector also probably looks quite… Read more »