Brian Grey Blog

Living in San Francisco I have pretty much written off Safeway as a grocery shopping option.  I mean, c’mon, it’s just not cool to shop at there.  Maybe when I’m in a pinch and need a gallon of milk, sure I’ll zip over to the Market Street Safeway.  Or if I need to get cash from the Wells Fargo, a coffee from their mini Starbucks, or a lottery ticket (how else am I going to pay for my kids to go to college?), okay, I’ll do the Safeway thing.  But they have disappeared from my grocery shopping radar, replaced by the ever cool Whole Foods Market and Trader Joe’s outlets sprinkled around the City, and the plethora of neighborhood specialty markets like Harvest and Real (“Expensive”) Foods.

But Safeway may have enticed me to comeback based on what I read this morning.  Their CEO Steven A. Burd wrote an Op-Ed piece in the Wall Street Journal outlining how the grocery store chain has turned their employee health care plan somewhat on it’s head by introducing novel concepts like accountability and incentives into the equation.  The quick summary of Safeway’s health-care program is that employees can receive significant discounts on their monthly premium payments by actually being healthy.  Basically, Safeway is thinking of it’s health-care plan more or less analagous to the way auto insurance works.  Why should the employees who don’t want to get healthy (e.g. the “bad drivers”) cause premiums to be increased for the healthy workers (e.g. the “good drivers”)?

Now I know that many people will read Burd’s article and claim how unfair it is to people who for whatever reason can’t pass the health tests that would result in lower premiums.  (In fact, an interesting sidebar with the Safeway program is the fact that it doesn’t apply to union workers).  And while I am sure there are cases where heredity may predispose someone from being able to lower their cholesterol through diet and exercise or otherwise pass the tests that qualify them for a discount, I also suspect a lot of the critics of what Safeway is doing just don’t want to be held accountable for a significant portion of what they pay for health insurance.  For employees who receive healt-care benefits from their employers, this perk has become an entitlement that in their mind comes without the requirement that they quit smoking, start exercising and/or get their hand out of the Doritos bag.

As Burd explains, Safeway has been able to essentially keep it’s health-care costs flat over the past four years (compared to an average 38% increase in company health-care expenses nationwide), there are other real benefits from Safeway’s approach here.  The company is clearly prioritizing healthy living as a core element of Safeway’s culture and exposing employees to information they might not otherwise have access.  In turn, this has to increasingly manifest itself in the form of happier, more productive and more retainable employees.  Now all of these so called “soft” employee-level benefits have to lead to a business benefit eventually, right?  Well, over the past 5 years Safeway’s stock has actually outperformed Whole Foods (though, Krogers has outperformed Safeway, so maybe Krogers is keeping treadmills and ellipitical machines in the back of their stores for lunch break workouts?).

The more far reaching takeaway from the Safeway example is that with all of the debate bubbling up around national healt-care legislation, a grocery store chain of all places has institued a very basic principle that would be worth inserting more broadly into the national dialogue.  Accountability and incentives need to be important concepts addressed in the health-care debate, and when used properly as in the Safeway example, they can be very powerful tools to help naturally guide us towards being a healthier, more competitive workforce that ultimately isn’t directing more than 1/5th of our resources to health-care spending.