Safeway health plan reduces company costs, promotes preventive health

Feb 13 2007

An employee health plan offered by supermarket chain Safeway that focuses on preventive care reduced company health care costs by 11% for nonunion employees in 2006, the San Francisco Chronicle reports.

The plan, which was offered in January 2006 to the company's nonunion workers, includes a $2,000 deductible and limits out-of-pocket spending to $3,000 for family coverage.

Out-of-pocket costs are partially offset by a company contribution of $1,000 to a health reimbursement account for the household, and unused funds in the HRA are rolled over to the next year.

The plan, administered by Cigna, covers all preventive care services that are appropriate for a beneficiary's age group.

It also offers a 24-hour hot line staffed by registered nurses, services to help people manage chronic conditions and incentives designed to promote healthier lifestyles, among other benefits.

According to the Chronicle, "None of these ideas is new or earth-shattering," but "while many companies have adopted a few of these approaches to cut costs and promote health, Safeway seems to be trying almost everything at once."

Safeway CEO Steve Burd, who has spoken about the plan to more than 300 executives during the past three months, said, "What is the revelation Safeway had two years ago that completely transformed our thinking? That 50 [%] to 60% of all health care costs are driven by behavior," adding, "If you design a health care plan that rewards good behavior, you will drive costs down."

This year, about 71% of the company's nonunion employees are enrolled in the plan, and Burd estimates that 95% will enroll in the plan next year.

However, Glenn Melnick, a RAND economist and professor of health economics at the University of Southern California, questioned whether the decline in health costs was the result of offering a lower-cost health plan and whether the lower costs would continue.

He added, "The experience in the first year may not represent the steady state."

Burd noted that nearly all of the savings generated in the program's first year came from changing the plan design.

However, he said that even if spending remained flat, as is projected for the coming year, the company still would be ahead of the trend in providing health care to workers.

Arnold Milstein, chief physician of Mercer Human Resource Consulting, said, "Any time you see a multipronged attack, it is not unusual for there to be a savings.

What is quite challenging is to attribute those savings to one intervention versus another" (Colliver, San Francisco Chronicle, 2/11).