Which Safeway can workers count on?
Of all those who’ve lauded Gov. Arnold Schwarzenegger’s plan for universal health coverage -- Democratic lawmakers, administration factotums, think-tank policy wonks and assorted others -- none has stood out quite like Steve Burd, the chairman and chief executive of Safeway Inc.
Here, after all, is a Fortune 50 CEO who has not only characterized Schwarzenegger’s proposal as “innovative” and “an opportunity for California to lead the national debate on healthcare reform,” but who has counseled the business community to do even more than the governor is asking.
Specifically, Burd has said, the plan’s mandate for companies to provide medical insurance at a cost of at least 4% of their payroll “is frankly too low and should be higher.” He is also a prominent advocate of wellness programs and preventive care, which he has described as “probably the most essential element” of any reform scheme.
On both counts, I couldn’t agree more. But how, in turn, is one supposed to square Burd’s bold remarks with the cold reality facing three-quarters of Safeway’s hourly workforce in Southern California? At present, the company’s healthcare contribution for this group of more than 9,000 employees amounts to zero percent -- nothing, zip, nada.
The reason: These are folks who joined the Pleasanton, Calif.-based supermarket giant after the 4 1/2 -month strike and lockout that ended in February 2004. And under the contract the United Food and Commercial Workers union signed with Safeway, Kroger Co.’s Ralphs chain and Albertsons (now owned by Supervalu Inc.), new employees can’t get any health benefits for 12 to 18 months. Their families aren’t eligible to be covered for 30 months.
Going without insurance for so long “is completely stressful,” says Suzanne Demers, who went to work at Safeway’s Vons market in Redondo Beach in July 2004 and earns $10.50 an hour training others, filling in at the Starbucks station and tackling a range of additional tasks. “You just hope and pray that you don’t get sick.”
Because hoping and praying doesn’t constitute sound preventive medicine, and seeing as Burd has, on more than one occasion, extolled the governor’s effort to “make sure every Californian has coverage,” I’m guessing he feels downright rotten about situations like Demers’.
The good news is that he now has a chance to change things. On Monday, the accord between the Southern California supermarkets and the UFCW is set to expire.
There is little chance of a settlement being reached before then. One of the big sticking points, evidently, is the wage-and-benefits package that was put in place last time -- an arrangement that thrust all new hires into a lower tier of workers with inferior pay and health coverage. The development was widely seen as a major blow to the union and, more important, it demolished the notion that a supermarket was a place where you could make a middle-class life.
After decades of relatively good labor relations, “all of a sudden there came Armageddon,” says Rick Icaza, the president of UFCW Local 770 in Los Angeles. The contract “destroyed the chance for people to have a career” in the grocery industry.
From the companies’ perspective, something had to give -- and, in a basic sense, they were right. With medical expenses skyrocketing, it became impossible to continue the old system in which unionized workers didn’t contribute directly to their premiums and the companies had to endure the financial pain alone.
But why stay with the current approach -- one in which insurance doesn’t kick in for a minimum of a year? (That compares, by the way, with an average of just two months at those large companies that have any waiting period at all, according to the Henry J. Kaiser Family Foundation, which conducts research into health issues.)
UFCW officials say the answer is plain: As 30,000-plus veteran employees retire, companies will be left with a unionized labor force that is made up entirely of lower-tier workers. And because their health benefits, in particular, are so crummy, most don’t stick around long enough for the supermarket to ever contribute a cent toward their medical coverage. The 12- to 18-month delay, in other words, becomes self-perpetuating because it leads to such high turnover, with just 15% to 23% of those in entry-level jobs staying beyond a year.
Burd -- who Icaza says was the main architect of the contract -- wouldn’t be interviewed for this column, but a Safeway spokesman says it’s inaccurate to suggest that the companies are trying to promote turnover so as to wriggle out of paying most healthcare costs in the region. He adds that there is nothing inconsistent about what Safeway is endorsing because the key, in all cases, “is sharing the cost burden between the employer and the employee.”
Others sympathetic to the supermarkets’ position point out that a good number of their new hires are teenagers who don’t want insurance anyway, either because they’re covered under a parent’s plan or because they’re young and feel immortal.
Maybe. Most, though, don’t have a choice. Right now, figures from the trust fund overseeing the health plan show that a mere fraction of lower-tier workers have been in the job long enough to qualify for coverage: just 3,312 out of 12,520 at Vons; 3,771 out of 11,474 at Albertsons; and 2,044 out of 8,438 at Ralphs.
And how long will most of these workers last before they, too, head for the exits?
No one can say for sure. But I’ll bet you this: A lot more would happily remain if Burd extended Safeway’s wellness plan to the ranks of the UFCW and persuaded his counterparts at Ralphs and Albertsons to do the same.
The logic behind Safeway’s initiative, begun about two years ago among non-union employees, is this: As much as 70% of medical costs, Burd has said previously, are driven by individual behavior. So, to encourage its people to adopt healthier lifestyles, Safeway gives them certain incentives. The company pays 100% for standard preventive screenings, mammograms after the age of 40, colonoscopies and annual physicals after 50, well-baby care and well-child care. “We’re trying to detect things early so you don’t have a catastrophic illness of any kind,” Burd has explained.
In addition, the company offers a 24-hour hotline staffed by registered nurses and special services to help employees manage chronic conditions.
The upshot: Safeway’s healthcare costs declined 11% the first year and held steady the next. And workers, while receiving more generous benefits than they had previously, saw their out-of-pocket expenses go down even more.
Last week, Burd told Wall Street analysts that he’s started exploring whether he can achieve “the same kind of reinvention of healthcare” with the UFCW. Icaza says nothing like this has been put on the table, but he’s definitely open to the concept. In fact, he recently dusted off a Local 770 contract from 1964 that included an incredibly farsighted provision for “predictive medicine” -- a program similar to what Burd is touting now.
Boy, wouldn’t that be a nice switch? Rather than fighting over diminishing benefits, perhaps Burd and Icaza can squabble about who should get credit for originating the idea that improved them.
Rick Wartzman is an Irvine senior fellow at the New America Foundation. He is reachable at rick.wartzman@latimes.com.
