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.