Whole Foods Health Care

Whole Foods is headquartered here in Austin, TX, and I know a fair number of people who’ve worked there. The general consensus seems to be that it’s a good company to work for (so long as you’re comfortable with the “crunchy” culture) with especially good benefits for a food retail chain. So I was interested to see a piece in yesterday’s WSJ by Whole Foods CEO John Mackey advocating an approach to health care reform more similar to the benefits Whole Foods provides its employees. Although Whole Foods is seen as a progressive employer, Mackey’s suggestions are more along the lines of what innovative libertarians and conservatives have suggested for health care reform. (If the GOP scores a tactical victory in staving off the many bad ideas in the current health care reform proposal, one hopes they will exert themselves to actually bring something to the table this time, perhaps along these lines.) Extracting his main proposals:

Here are eight reforms that would greatly lower the cost of health care for everyone:

•?Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs). The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees’ Personal Wellness Accounts to spend as they choose on their own health and wellness.

Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan’s costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction.

•?Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.

•?Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.

•?Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.

•?Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.

•?Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor’s visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?

•?Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.

•?Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren’t covered by Medicare, Medicaid or the State Children’s Health Insurance Program.

On a side note: Aside from equalizing the tax benefits of individual and employer health insurance, is there any reason not to provide incentives for “voluntary solidarity organizations” (to attempt to coin my very own “social justice” term) to provide health insurance in the same large-pool way that big employers do?

For example, at the Fortune 100 company I work for, we have a choice of two insurance companies (Aetna and Humana) and several different plan options within each company. Everyone in the family is covered regardless of medical conditions, and the prices are based on the overall company population. Now, if I had the option to instead sign up the my parish, or better yet (larger pool) my diocese, or through the Knights of Columbus or some other Catholic organization like that, I’d be happy to do so — even if the cost was a little bit more. (I know that the life insurance I have through the Knights is roughly in line with market prices, but I didn’t worry about whether it was the lowest because there were non-monetary reasons for working with them.) Having an insurance pool administered by the diocese or the Knights would also provide an obvious mechanism for giving people who couldn’t afford coverage lower costs, while making that up through donations from members willing (indeed, eager) to help cover the less fortunate.

I believe there would have to be some different regulations in place to support that kind of thing (right now, it’s all pointed towards employer-funded care with a very small number of people covered individually, often under rather unattractive terms) but is there a practical reason it wouldn’t work well? Perhaps combined with a trend towards a HSA/High Deductible Insurance type of insurance?

11 Responses to Whole Foods Health Care

  • My thinking is as follows:

    1. Obama needs politically to pass some sort of major health care bill. However, it doesn’t much matter what’s in the bill so long as they pass something.

    2. Despite having majorities in both houses, it appears that Obama can’t pass a bill without significant Republican support.

    3. I therefore conclude that Obama’s should abandon his current plan, and adopt something like what’s laid out in the Mackey article (he’s a good PR guy, and so should be able to spin it as a liberal victory).

    Not that I think he will do this, mind you.

  • “If the GOP scores a tactical victory in staving off the many bad ideas in the current health care reform proposal, one hopes they will exert themselves to actually bring something to the table this time…”

    It is my hope too that the GOP would then bring something serious to the table. Unfortunately, at this point I have my doubts that that is their intention.

  • I never understood the point of the use-it-or-lose-it requirement of HSAs (at least ours is that way).

    Most of those seem like decent proposals. I take issue with the lawsuit observation. It seems to me that’s more of a PR gimmick than reflection of reality. Everyone loves bashing lawyers.

    We have had medical malpractice tort reform in Texas for going on 30 years now, and it has not had an appreciable effect on malpractice premiums that I am aware of.

    For some reason, unlike consumer technology, medical technology gets more expensive rather than less, which is the real driver of medical costs. Part of it can be a smaller pool of buyers over whom to spread development costs than more general technology (like pc’s, cell phones, etc.). Part of it is the high regulatory costs in getting technology approved for use (mostly drugs, but also other forms of technology – implants, prosthetics, etc.). And part of it is a protectionist attitude on the part of the medical industry (restrictive licensing and limited med school enrollment, Certificate of Need requirements for hospital construction/expansion).

  • I went to a Town Hall meeting last night put together by my Rep (Rick Larsen, Democrat, WA-2). About 2400 folks in attendance, roughly a 50-50 split ideologically.

    Lots of good questions. I bring up the meeting, because one gentleman brought up this article, and asked Mr. Larsen to look at it. He said he would, and I hope he does. The proposals laid out by Mr. Mackey seem like they can make a lot of headway in addressing the concerns voiced by many people out there.

    I too hope that GOP leaders bring something like this to the table.

  • There’s a whole class of medical expenses that is problematic for the high deductible plan. Somewhere between the routine office visit and the catastrophic emergency lies a middle ground of expenses. With a big enough family, no FSA is going to make up for these kinds of expenses. These are the things that aren’t “mortgage-the-house” procedures that are nonetheless very damaging to a family on limited income. What happens if someone in your family requires two crowns at $1000 a pop, you’re having a baby that year, and your kid requires relatively minor surgery for an accident? (All real life examples from our own family this year.) It’s not obvious how the combination of FSAs (or similar benefits) plus a high deductible plan would help.

  • What happens if someone in your family requires two crowns at $1000 a pop, you’re having a baby that year, and your kid requires relatively minor surgery for an accident?

    Presumably you would make the deductible and whatever co-payments required by the plan, and insurance would cover the rest. How would this be any worse than under a normal plan?

  • c matt,

    I never understood the point of the use-it-or-lose-it requirement of HSAs (at least ours is that way).

    That’s the HSA’s through employers, the standalone plans do not cause you to lose your balance each year.

    We have had medical malpractice tort reform in Texas for going on 30 years now, and it has not had an appreciable effect on malpractice premiums that I am aware of.

    I think it has had a big impact on the growth of the medical system here, I don’t know exactly how it has affected the malpractice premiums specifically.

    For some reason, unlike consumer technology, medical technology gets more expensive rather than less, which is the real driver of medical costs. Part of it can be a smaller pool of buyers over whom to spread development costs than more general technology (like pc’s, cell phones, etc.). Part of it is the high regulatory costs in getting technology approved for use (mostly drugs, but also other forms of technology – implants, prosthetics, etc.). And part of it is a protectionist attitude on the part of the medical industry (restrictive licensing and limited med school enrollment, Certificate of Need requirements for hospital construction/expansion).

    It’s due to an inneficient market, the payers and the consumers are separated.

    j. christian,

    There’s a whole class of medical expenses that is problematic for the high deductible plan. Somewhere between the routine office visit and the catastrophic emergency lies a middle ground of expenses. With a big enough family, no FSA is going to make up for these kinds of expenses. These are the things that aren’t “mortgage-the-house” procedures that are nonetheless very damaging to a family on limited income. What happens if someone in your family requires two crowns at $1000 a pop, you’re having a baby that year, and your kid requires relatively minor surgery for an accident? (All real life examples from our own family this year.) It’s not obvious how the combination of FSAs (or similar benefits) plus a high deductible plan would help.

    What you aren’t getting is that over time, the cost of medical care for routine procedures = the cost of medical insurance. Instead of depositing that money with the insurance companies, under the HSA you deposit in your own account so that it’s their when you need it.

    Under the McCain plan you would have started with $5000/year tax credit as an individual (don’t know how it works for families) to fund HSA/Insurance in whatever proportion you see fit.

    There will be times though, when bad fortune puts people in dire straits. There ought to be, and generally is, payment plans, and other aids to get people over the rough spots.

    ps. there are lower cost alternatives to $1000/crown, these may even be temporary until the funds are available.

  • j. christian,

    I think the confusion here has to do with what is meant by “high deductible”. The high deductible plans I’ve seen associated with HSAs are based on an annual deductible, so as soon as you’ve paid (with a 2500 deductible) $2500 total in medical expenses for the year, the insurance policy pays the rest.

    There may well also be plans that work more like auto insurance, with a deductible per incident, but I haven’t run into them. I’d assumed, based on my limitted experience of places I’ve worked, that Whole Foods was doing an annual deductible, but I could be wrong.

  • If Whole Foods’ health insurance plan is so good, that explains why certain hardcore supporters of Obamacare such as (you guessed it) SEIU have started calling it “Whole Paycheck Foods” and suggesting a boycott of the company!

    Having a Medical Savings Account has been helpful to me — the State of Illinois offers them to employees; you choose how much you want to put into it every payday, and you have 15 months — the “plan year” plus a 3-month “grace period” — to use up those funds. I would prefer that it not be “use it or lose it” either, but in its present form, it works well for covering things like co-pays on routine checkups, dental work, etc.

    However, I can see where people with large families and/or lots of expensive injuries, prescriptions, or medical problems would never be able to save enough to cover their medical costs with an HSA.

    Also, most doctors and hospitals will work out payment plans with you if you are uninsured or your insurance coverage is inadequate. This happened to me when my husband had an operation, and the insurance he had (as a student) covered only about 1/3 of the cost. The hospital had a charity care program that forgave their ENTIRE portion of the bill, and the surgeon (who charged a separate bill) has been taking monthly payments from us for the past two years… we’re finally down to the last $100 or so ;-)

  • Okay then, lets all start savings accounts and pull out of our insurance plans.
    It would be interesting to see how the insurance companies would respond to such a movement.

  • Biggest problem I can see with a Knights of Columbus plan is morality protections on what’s required to be insured.

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