The Stop & Shop Strike: Important, Yet Just a Distraction
Carroll Andrew Morse
The issues in the looming Stop & Shop strike are all too familiar, centering on health benefits and retirement benefits. From Gregory Smith and Talia Buford in today’s Projo…
[Stop & Shop], based in Quincy, Mass., wants union workers to contribute to their health-care premiums and allow it to switch from an employer-paid pension fund to a 401(k) plan for new employees. [Union Official Jim Riley] said the employees would be willing to help pay the premiums if their health-care plan is improved.
The big insurance companies must either sit back and laugh, or maybe just breathe a sigh of relief when they read a story like this, thankful that America’s employment based system of health insurance allows them to raise rates without improving the quality of their product, while deflecting all of the blame on to employers.
Stop & Shop is not responsible for rising healthcare costs. Insurer decisions beyond Stop & Shop (or any employer's) control, motivated by over-regulation state mandates, are responsible for that. Neither are Stop & Shop employees unreasonable in objecting to being charged more for the same coverage. When insurance companies want to charge higher prices for the same product, consumers should have the right to do what they would do with any other type of product -- to look for a better deal from a different supplier and to take their business there when they find one. Stop & Shop employees don’t have that option. Because of the way that insurance law is structured, most employees of Rhode Island businesses don’t. We’re all locked into a single, employer-provided option for health insurance and told “take it or get nothing at all”.
Stop & Shop’s management didn’t create the system that binds health insurance to employment, they are just trying to get along within it. That system, and not Stop & Shop's little corner of it, is what needs changing. State mandates should be relaxed, so that cheaper insurance policies are available. People should be given the option of high-deductible insurance plans and tax-free HSAs to cover their routine, recurring expenses. And individuals should be given the option of purchasing their health insurance from states where coverage is cheaper. These reforms could be combined in a way that would allow people to address their personal, medical needs without consulting with their employers.
If these options were available, many Stop & Shop employees would be able to find an affordable health plan that suited them. Some might even see an increase in their take-home pay. And, as an additional benefit, we would skip over a whole lot of labor strife that does very little to resolve the heart of the healthcare issue, by taking employers out of a role they don't want anyway as middlemen between individuals and insurers.
Will we ever see any interest from the left in the kinds of health insurance reforms that empower indivdual employees? Or are the forces in government and politics who should be labor’s allies more interested in managing the lives of employees, maybe even in just using them as a pathway to political power, than they are in giving those employees the tools they need to make their lives better?
Great topic. My company recently got new rates for the next year. The premiums went up 36%. When I inquired just what the @#$%* made it go up so much, the broker was at a loss. He did however, tell me that with the plan, fertility drugs had to be covered per state law. My question was, but what about the single guy who has the plan; he would never need that coverage. Yes, but I still have to pay for it. Why? Because of the stupid state mandates. This is utterly ridiculous.
I ended up opting for higher deductibles, to get the cost down. My next step is to nix health coverage alltogether. At over $1,000 per month, for a family plan, I will spend over $60,000 in the next five years for health insurance, not counting the increases sure to come. I have children to put through college. They are making it so that the risk reward function is favoring taking the risk. I have to believe this is one of the reasons that so many are uninsured. For many, I am sure that it has nothing to do with whether they can afford it or not, but it is simply a conscious decision that has made the risk of not having insurance not all that great relative to what you have to pay for having it. We are reaching a point of anarchy within the current system.
Beware, Peapod customers: our delivery guy told me this morning that if a strike happens, S&S will need at least two weeks to get replacements trained and on the road. He figures the chain will have a tough time keeping the stores staffed, much less Peapod.
If it comes to that, there's a Shaw's down the street - I get a little more exercise, that's all.
From what I'm reading, I think Stop and Shop's position seems very reasonable. I'm amazed at the shortsightedness of the union representing these employees, as if Stop and Shop exists in a vacuum. It seems like a lot of "take" and very little "give" -- but a lot of it might also be rhetoric. It certainly helps me understand better why Shop and Shop's prices always seemed a little bit high. I go to Stop and Shop, as well as to Shaw's, so I'm hardly a store brand loyalist. Not only do they compete with places like Shaw's, but they are ever more in competition with places such as Walmart and Target.
C'mon, who here has a health care plan to which they contribute nothing? Pensions for grocery store clerks? If I weren't reading it, I'd think it was a joke. Somebody needs to let these folks know this isn't 1960 anymore. Outside of the public sector (which only get it because of their pervasive influence peddling in the legislature), virtually no one has a traditional pension plan anymore. In order to be competitive in the face of rising costs, they either have to raise prices, which then drives away value-oriented customers, or reduce their expenses.
Unless an agreement is reached between the management and the union, I think Shop and Shop is simply going to wait this one out. It's a matter of short term sacrifice versus the longterm financial health of the company. They cannot continue to exist in the face of fierce competition without modifying their outlays. Hate to break it to the liberals, but companies exist to make a profit for their owners/shareholders. Once they stop doing that, they're ultimately going to be toast.
Eliminating employer-based health care system won't fix anything.
In fact, the sale of insurance directly to the consumer would raise rates for everyone simply because insurance companies would have a difficult time managing risk on a case-by-case, individual basis. They would adjust by raising rates for everyone. It is far easier to take a group of office workers, a group of construction workers, etc. and develop appropriate premium levels. Alot can be determined about a person's health and risks based on where they work and what they do.
If you've ever asked for an insurance quote for an individual, you'll always find that it's MUCH higher than belonging to virtually any group. In the world of insurance, the old adage that there is strength in numbers applies.
The real problem is that employers face rapidly growing healthcare costs. This is a problem faced by employers throughout the country and the best way to solve this problem is through the competitive free market.
The problem for RI is that, unlike many other states, there are only two private insurers in the state and RI law makes it extremely difficult for an out-of-state company to enter the RI market.
The suggestion that an invididual should be allowed to purchase their insurance from states where it is cheaper runs afoul of constitutional issues (federalist system allows each state to make laws governing the insurance provided to their citizens) so you would either need a federal solution or just change RI law to make it easier for competition to enter the state.
There was an attempt at the federal level to undue some state-level insurance mandates by passing a federal law, but it hasn't been really effective. Given the situation of health insurance in the RI, the latter option would seem to make the most sense.
There would be no need to look out-of-state if RI would seek to attract, rather than prevent other insurance carriers from entering the market.
HSA's and high-deductible insurance plans help, but they're no substitute for a truly competitve private sector.
Correctamundo, Anthony. I had to pay for my own health insurance for awhile, and there's still a big hole in my nose.
Will, was it unions' fault that we had an ice storm last week?
I'd love to know what percentage of supermarket employees are there for the long term. Many of these employees are high school and college kids who move on to other things before they even become eligible for health insurance, pensions, etc. I just don't think a large of employees stay around long enough to be eligible for these benefits.
As far as changing from a pension system to a 401(k), that's something that should be negotiated, not dictated. And just saying "we'll throw replacement employees in" in much easier said than done - there'a a little thing called level of service. Look what happened to the NFL when it threw replacement players out there. The replacements' level of service, I'll bet you, will quickly send you over to Shaw's.
And Will, profit and equitable treatment for employees are NOT mutually exclusive. This principle I see too often in the business world that you didn't make a good deal unless you screwed the other guy is completely whack.
I'm going to do something that I don't think I've ever done, which is to agree with both Anthony and Rhody. As someone who has had more than enough experience in "dealing" with the healthcare system, I can ensure you that removing the role of the employer, without a radical overhaul of the overall structure of healthcare delivery system in America, is a recipe for calamity for at least two reasons: risk pools and employment incentives.
Our current healthcare purchasing structure is based on the concept of "risk pools." If you eliminate the pools (i.e. the purchasing of insurance through an employer or other similar entity), and don't replace it with something roughly equivalent, and then put all the onus on the individual purchaser, in the absence of a truly competitive environment such as what we have here in Rhode Island, the cost to purchase health insurance for the individual will go up dramatically. That would especially be the case for those whom are not in optimal health or whom may have genetic predispositions to certain diseases whose "costs" to the insurer are currently significantly offset by being included in large risk pools along with much healthier individuals.
Secondly, using the employer as a primary vehicle through which people get insurance has a secondary benefit which people often forget about: it promotes legitimate employment among a significant segment of the population whom might otherwise make their money through illegitimate or "all cash" means.
The problem that I see is that as Andrew proposed, if you take employers out of that role, something has to fill the vacuum. Unfortunately, human nature as it is, my guess is that it would end up being the government in control of it, not the individual. HSA's will work for a certain segment of the population. However, it is probably not the portion of it most in need. It primary would benefit generally healthy people who have ability to set aside discretionary funds from their paychecks to offset some future healthcare expenses. It may be a small piece in a larger puzzle, but it really doesn't do anything to create real competition in the healthcare industry. That would cause many more problems than it could ever solve.
We need a radical overhaul of the system, not biting around the edges, if we really want to "solve" the issue. We definitely need to do something to promote an environment where real, interstate healthcare competition exists. The problem is that the drive has been towards mergers and consolidation, not with the promotion of competition. For starters, we need the ability to purchase healthcare from anywhere, with lots of choices, and preferably with significant portability. We also need to address the problem of the self-employed, whose current ability to purchase healthcare is nearly as bad as if some guy knocked on Blue Cross's door as said "can I get some insurance?" Many self-employed go without health insurance simply because the rates are obscene. If they get very sick, the business is likely to be the first casuality. In a free market, real competition drives down costs for consumers. Right now, we have a very restrictive environment where true competition doesn't exist. We need competition!
"The problem that I see is that as Andrew proposed, if you take employers out of that role, something has to fill the vacuum. Unfortunately, human nature as it is, my guess is that it would end up being the government in control of it..."
Will, that comment couldn't be more correct. In fact, you don't have to "guess"--that's an understatement. It's already happening.
RI now has a full-time health insurance commissioner who came, not from the private sector, but from RI's Medicaid program and played a critical role in creating RIte Care.
There are those in government who want to see a publicly-funded, universal healthcare system so badly that they are willing to engage in scare tactics and prevent private competition.
Liberals are trying very hard to convince people, particularly small buisness owners, that the private sector has failed them and that only government can solve the problem.
Everyone knows that our healthcare system is broken, so it's a valid fear to play upon. The irony is that these same liberals structure the law so as to prevent new companies from coming into the state.
While increasing competition would be good for the consumer, it would be moving the state to a less centralized, as opposed to a more centralized, health care system. And because it's easier to implement socialized healthcare in a centralized system, the liberals are content to keep competition to a minimum while working to gradually increase government regulation.
The only thing that has prevented RI from already having government sponsored healthcare is the cost. Medicaid and RIte Care are responsible for most of the deficit we face and state-sponsored healthcare would require heavy subsidies which the state can't afford.
Anthony,
It’s good to have you back commenting, but you’re wrong on almost every point. And you’ve pulled Will over to the darkside, joining Rhody, who (as much as we love him) hangs out there a lot.
You’re right on one point…
[There’s] no substitute for a truly competitve private sector.
But you can’t build a competitive private sector starting from the employer-based insurance system. As long as people can’t walk away from a bad deal to find a better one, a competitive market cannot exist. Employer-based insurance is to a competitive insurance market what the old Soviet Union was to competitive elections – here’s your one choice, take it or leave it.
The idea that individuals benefit from employer-based insurance is wrong on many levels.
1. Here’s the single most important point: It only seems like the cost of individual insurance policies is a tiny fraction of the cost of employer-based group policies. In reality, in employer-based plans, the employer takes money that is part of employee compensation, and hands it directly to an insurance company, without it ever passing through employee hands.
Since employees never see their money and don't have much choice as to where it goes, they psychologically think they are getting something for free. Individual insurance, on the other hand, feels more painful -- and would feel more painful, even if the cost was the same -- because 100% of the premium vanishes from an account or a paycheck that belongs to an individual employee.
2. Employer-based insurance doesn’t do anything to make risk pooling any easier or harder. If insurance was decoupled from employment, I could specify my job on an insurance application. Problem solved.
2A. And for many major medical expenses that most really need to be “insured” against -- getting cancer or some other disease, getting into a car accident, etc – type of employment is a minor factor.
3. The differences in price the do exist between employer and non-employer based policies have as much to do with government regulations, not economics or laws of nature. That’s why rates vary so widely from state-to-state. The people aren’t that different, the mandates and the community rating rules are.
4. The Federalism issue is a canard. The Rhode Island legislature could pass a law (maybe I shouldn’t give them any suggestions) saying that Rhode Islanders are only allowed to have refrigerators manufactured in-state in their houses, to park automobiles manufactured in-state in their driveways, etc. The supply would go way down, the price would go way up, and many people wouldn’t be able to afford whatever commodity we’re talking about.
(Then the RI Poverty institute would write a series of op-eds saying the only possible way to fix this problem would be to raise taxes to provide subsidies to the poor to buy refrigerators, automobiles, or whatever. “How can we justify not raising taxes, when the parents of small children can’t afford refrigerators!?!?” See the parallel here?)
Current laws preventing people from buying insurance policies they could afford are ethically and morally wrong, just as laws and regulations preventing people from buying a commodities they could otherwise afford would be morally and ethically wrong.
There is no way this will be solved by the government. We need to have less government involvment. It needs to be solved via competition. COMPETITION IS GOOD! I would not suggest that it would be the end of all problems, but it would be better in the overall. There is no perfect solution, but there certainly are better ones. To cling to a proven failed system, because we have yet to discover the perfect system (that doesn't exist) is insane.
Furthermore, having employers responsible for there employees health insurance is an absurd idea. If this is such a good idea, then why don't employers have responsibility for the employees auto insurance. It is a nonsensical idea that has gone unchallenged for way too long.
All this talk about competition to provide goods and services at a reasinable price is all well and good, but what about competition for employees? Particularly in a business like grocery stores, companies need to think about offering a compensation package that will attract the best workers available and keep their loyalty. That's an issue which sometimes gets lost.
It depends what you value: a store where you get rock-bottom prices but raging incompetence and/or long lines at the checkout, the deli, etc., one where you get better service but you pay a little more for it, or some combination of the two. YMMV.
P.S.: I love using those clerkless scanners, but there are times when, even with a 12-15-item limit, they draw longer lines than the human cashiers (and then there are the issues the humans have to resolve on those pieces of machinery).
Andrew,
Your post oversimplifies the insurance industry.
Under your scheme, if I'm an insurance company selling to individuals and I see that you develop cancer, I could just drop you or raise your premiums incredibly high. Why should other healthy people subsidize your care just because you are sick? The whole point of insurance is to pool risk.
The comparison to auto insurance doesn't work, either. The state eliminates the highest risk drivers (DUI's, multiple traffic offenses, etc.) by suspending and/or terminating driver's licenses. The same can't be done with healthcare. Instead, the state covers some of the highest risk healthcare recipients.
Employers have a choice as to what health plan is the best fit for them. Employees can then choose to work for the employer or not, and many prospective employees make such choices depending on what health care coverage is offered as part of their compensation package.
The problem is that RI employers have too few choices when selecting health plans, not that employees have no choices.
As long as it's not a public employee union, I don't care. If S&S gets too expensive or goes out of business, there's always Shaws, Whole Foods, Seabra...
When the private sector unions get too greedy, in the long run they screw themselves out of a job.
When the public sector unions get too greedy, and public officials are either incompetent or corrupt, the taxpayer gets screwed. Public sector unions should be outlawed!
Let the invisible hand do its thing in the private sector.
Guess I'm still temporarily on the dark side, because I agree with Anthony again.
"The whole point of insurance is to pool risk."
We pool risk, because the liklihood of everyone in the pool all getting terminal cancer, a major illness, or all needing root canals at the same time or at all, is expontentially less than it is for a single individual, in which would essentially be a risk pool of one. Risk pooling allows risk to not only to be spread out over a wider group of people, but also over a longer period of time as well, because the pool is constantly being refreshed with new individuals, who are presumably also healthier. For instance, my chances as an individual of dying are roughly 100% (barring a miracle). However, the chances of everyone in a risk pool dying at the same time, or even in the same year, is expontentially less. The same concept works for home insurance. Everyone's house is statistically not going to burn down within a short period of time (barring a nasty "fire and brimstone" event).
Again, if the risk pool, which is the basis of every kind of insurance product, is decoupled from employment, then what would it be replaced with? There needs to be a mechanism that involves multiple individuals. If it doesn't, it really ceases to be true "insurance" (protection against a possible future event) and more of a personal "rainy day fund" (which is what HSA's basically are). HSA's are certainly a good thing, though they are especially great for those who have extra disposable income and whom are currently in optimal health. They are part of a comprehensive solution, but they are not themselves the solution. At present, you either have private (company-related) risk pools or you have public (government operated) risk pools. Unless you have an idea for some privately operated "third way" (possibly garnering you a Nobel Prize nod), I don't see this getting better soon.
Honestly, I don't like that the employer has to take on this role. If there were a legitimate, cost effective alternative, I'd be all ears. However, as I stated earlier, if you eliminate the role of the employer as essentially a manager of a risk pool, then barring the creation of some unknown entity, you'll end up with something government run and operated. My position on that is clear -- as Ronnie once said, "Government is not the solution to our problem, government IS the problem!"
Will:
If you ended employer risk pools, you’d end up with the same kind of risk pool you’d have for auto insurance, or homeowners insurance, or any other kind of insurance not sold through your employer. There’s nothing magic about employer based pools.
In reality, you’re not really in a risk pool with just your fellow employees; you’re in a risk pool with everyone in the state who has a policy with your insurer. If everyone in United’s Rhode Island based pool bought a policy directly from United, the risks would be exactly the same.
And the employer-based insurance system is a government program, where the government and the insurance companies have made a deal to outsource costs and paperwork and hassles to business owners like Roland and Jim – without compensating them for it!
Anthony:
No, an insurance company can’t just drop me for developing cancer, if I’ve insured against it. Insurance is a bet against a future event occurring, which the insurance company is obligated to pay, if the event occurs. An insurance company that tries to avoid paying legitimate claims they’ve contracted to pay should be liable for fraud, just like anyone who sells a product they have no plan to deliver should be liable for fraud.
Asking…
Why should other healthy people subsidize your care just because you are sick?
…is like asking why should other homeowners subsidize repairs to my house, just because mine is the one that burned down. The answer, again, is because that’s what insurance is – many people setting a little bit of money aside that can be used to pay for a few unfortunate events that might occur.
Furthermore, people should have information available to them, like Insurer A denied 30% of claims last year, while Insurer B denied only 5% on a similar policy, and then be able to choose which company they want to go with, not be told they only have one choice and to take it or leave it.
"No, an insurance company can’t just drop me for developing cancer, if I’ve insured against it..."
Andrew, I don't think you fully understand how insurance works. When you purchase insurance, you enter into a contract with a finite term. After the term is over, your contract must be renewed and the insurer will normally make rate adjustments, decide whether or not to renew your policy, etc.
The only "future events" that the insurer is "obligated" to pay for are those events that occur during the term of the contract. The insurance company can drop you after the contract, (normally one-year for health insurance) expires. Treatments for diseases such as cancer can last several years, so it would be very easy for an insurance company to reduce risk by dropping cancer patients under your proposal.
My comment asking why healthy people should subsidize sick people was meant to be sarcastic and what I send in the next line--insurance is meant to pool risk.
As I mentioned, insurers have other tools to control risks other types of insurance.
People with DUI's, low credit scores, multiple traffic citations, etc. either have their driver's licenses suspended or pay significant amounts for insurance.
You mention homeowner's insurance, but the reality is that such insurance isn't really sold on an "individual" basis. Risk groups are formed by multiple factor such determining how close a house is to the water, age of the house, neighborhood location, etc. So while you may think that you're buying "individual" homeowners insurance, you're really not. You're being pooled with hundreds of other nearby homeowners.
One other note, employers can always use indpendnent insurance and benefit advisors who advise them on the best fit for their employees and handle the paperwork for a negligible fee, just as individuals use insurance agents.
Here is another thought: If health insurance were handled more like auto insurance where your own health determines your cost, people would take better care of themselves. When you can be a fat, lazy, smoking slob, and hide in a group for purposes of health coverage, what incentive is there to take better care of yourself.
I think that this system has a lot to do with why American overall are so fat and out of shape.
Jim,
You're right. There is a trend in health insurance that is leading to offering incentives to people that engage in healthy behavior, have gym memberships, avoid smoking, etc.
This allows for some individualization within the group. Many policies offer this type of discount, although I wonder if the average employee is aware of it.
Sometimes you have "ask about it at work" as the AFLAC duck might say.
Stop & Shop workers pay dearly for their health care; we have to pay $1,500 out of pocket plus $200 deductibles before major medical tests, etc., are covered in full, plus we pay co-pays for doctors of @20-$30 plus co-pays for medications in some cases 25% of the retail cost.
Over the past dozen years our raises have lagged behind the cost of living. I've looked at these $20-$30 rases as a trade-off for health care. Our plans get downgraded with every contract. Until a recent change occured, we could only get blood drawn through a single lab without paying 10% of that. You go see your doctor and then need your labs done where there is questionable quality control, and I can't tell you how many times the results are not sent to the doctor.
As for the pension, please do not confuse our pension with the public sector; with 22 years of service my pension would be $1000 per month. The company has been adding $69 dollars per year, hardly a princely sum.
Stop & Shop is second after WalMart for having its employees on MassHealth (here in MA, anyway) because of the 2 year wait for new hires. This not only penalizes them but lessens the pool of funds available to be paid out for members who do get sick, leading to the diminution in benefits with successive contracts.
A full-timer hired today will make the equivalent hourly wage I made 20 years ago. S&S made over 700 million in profits last year; do you think none of that should go to the people who made that happen???
Have your facts correct before you trample on us any more than some of you already have.
Any one who uses those self service check outs should stop and think that they are putting someone out of work
Any one who uses those self service check outs should stop and think that they are putting someone out of work
@Will
With most shopping markets loosing money, example shaws closed all there CT stores , with Stop and Shop buying out 5 of them , Price Right bought out the rest , and some were closed all together. Stop and Shop made 1.6 billion $ last year. One of there most profitable years ever. If they weren't making money and shutting down slow stores , i would think that they have every right to cut back. But they are only cutting back to put more money in there bonus checks and to increase profits even more. Not to mention Stop and Shop is owned by a European company they could care less about the people that work for them.
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Great topic. My company recently got new rates for the next year. The premiums went up 36%. When I inquired just what the @#$%* made it go up so much, the broker was at a loss. He did however, tell me that with the plan, fertility drugs had to be covered per state law. My question was, but what about the single guy who has the plan; he would never need that coverage. Yes, but I still have to pay for it. Why? Because of the stupid state mandates. This is utterly ridiculous.
Posted by: Jim at February 19, 2007 12:14 PMI ended up opting for higher deductibles, to get the cost down. My next step is to nix health coverage alltogether. At over $1,000 per month, for a family plan, I will spend over $60,000 in the next five years for health insurance, not counting the increases sure to come. I have children to put through college. They are making it so that the risk reward function is favoring taking the risk. I have to believe this is one of the reasons that so many are uninsured. For many, I am sure that it has nothing to do with whether they can afford it or not, but it is simply a conscious decision that has made the risk of not having insurance not all that great relative to what you have to pay for having it. We are reaching a point of anarchy within the current system.
Beware, Peapod customers: our delivery guy told me this morning that if a strike happens, S&S will need at least two weeks to get replacements trained and on the road. He figures the chain will have a tough time keeping the stores staffed, much less Peapod.
Posted by: Rhody at February 19, 2007 12:26 PMIf it comes to that, there's a Shaw's down the street - I get a little more exercise, that's all.
From what I'm reading, I think Stop and Shop's position seems very reasonable. I'm amazed at the shortsightedness of the union representing these employees, as if Stop and Shop exists in a vacuum. It seems like a lot of "take" and very little "give" -- but a lot of it might also be rhetoric. It certainly helps me understand better why Shop and Shop's prices always seemed a little bit high. I go to Stop and Shop, as well as to Shaw's, so I'm hardly a store brand loyalist. Not only do they compete with places like Shaw's, but they are ever more in competition with places such as Walmart and Target.
C'mon, who here has a health care plan to which they contribute nothing? Pensions for grocery store clerks? If I weren't reading it, I'd think it was a joke. Somebody needs to let these folks know this isn't 1960 anymore. Outside of the public sector (which only get it because of their pervasive influence peddling in the legislature), virtually no one has a traditional pension plan anymore. In order to be competitive in the face of rising costs, they either have to raise prices, which then drives away value-oriented customers, or reduce their expenses.
Unless an agreement is reached between the management and the union, I think Shop and Shop is simply going to wait this one out. It's a matter of short term sacrifice versus the longterm financial health of the company. They cannot continue to exist in the face of fierce competition without modifying their outlays. Hate to break it to the liberals, but companies exist to make a profit for their owners/shareholders. Once they stop doing that, they're ultimately going to be toast.
Posted by: Will at February 19, 2007 4:19 PMEliminating employer-based health care system won't fix anything.
In fact, the sale of insurance directly to the consumer would raise rates for everyone simply because insurance companies would have a difficult time managing risk on a case-by-case, individual basis. They would adjust by raising rates for everyone. It is far easier to take a group of office workers, a group of construction workers, etc. and develop appropriate premium levels. Alot can be determined about a person's health and risks based on where they work and what they do.
If you've ever asked for an insurance quote for an individual, you'll always find that it's MUCH higher than belonging to virtually any group. In the world of insurance, the old adage that there is strength in numbers applies.
The real problem is that employers face rapidly growing healthcare costs. This is a problem faced by employers throughout the country and the best way to solve this problem is through the competitive free market.
The problem for RI is that, unlike many other states, there are only two private insurers in the state and RI law makes it extremely difficult for an out-of-state company to enter the RI market.
The suggestion that an invididual should be allowed to purchase their insurance from states where it is cheaper runs afoul of constitutional issues (federalist system allows each state to make laws governing the insurance provided to their citizens) so you would either need a federal solution or just change RI law to make it easier for competition to enter the state.
There was an attempt at the federal level to undue some state-level insurance mandates by passing a federal law, but it hasn't been really effective. Given the situation of health insurance in the RI, the latter option would seem to make the most sense.
There would be no need to look out-of-state if RI would seek to attract, rather than prevent other insurance carriers from entering the market.
HSA's and high-deductible insurance plans help, but they're no substitute for a truly competitve private sector.
Posted by: Anthony at February 19, 2007 4:31 PMCorrectamundo, Anthony. I had to pay for my own health insurance for awhile, and there's still a big hole in my nose.
Posted by: Rhody at February 19, 2007 5:04 PMWill, was it unions' fault that we had an ice storm last week?
I'd love to know what percentage of supermarket employees are there for the long term. Many of these employees are high school and college kids who move on to other things before they even become eligible for health insurance, pensions, etc. I just don't think a large of employees stay around long enough to be eligible for these benefits.
As far as changing from a pension system to a 401(k), that's something that should be negotiated, not dictated. And just saying "we'll throw replacement employees in" in much easier said than done - there'a a little thing called level of service. Look what happened to the NFL when it threw replacement players out there. The replacements' level of service, I'll bet you, will quickly send you over to Shaw's.
And Will, profit and equitable treatment for employees are NOT mutually exclusive. This principle I see too often in the business world that you didn't make a good deal unless you screwed the other guy is completely whack.
I'm going to do something that I don't think I've ever done, which is to agree with both Anthony and Rhody. As someone who has had more than enough experience in "dealing" with the healthcare system, I can ensure you that removing the role of the employer, without a radical overhaul of the overall structure of healthcare delivery system in America, is a recipe for calamity for at least two reasons: risk pools and employment incentives.
Our current healthcare purchasing structure is based on the concept of "risk pools." If you eliminate the pools (i.e. the purchasing of insurance through an employer or other similar entity), and don't replace it with something roughly equivalent, and then put all the onus on the individual purchaser, in the absence of a truly competitive environment such as what we have here in Rhode Island, the cost to purchase health insurance for the individual will go up dramatically. That would especially be the case for those whom are not in optimal health or whom may have genetic predispositions to certain diseases whose "costs" to the insurer are currently significantly offset by being included in large risk pools along with much healthier individuals.
Secondly, using the employer as a primary vehicle through which people get insurance has a secondary benefit which people often forget about: it promotes legitimate employment among a significant segment of the population whom might otherwise make their money through illegitimate or "all cash" means.
The problem that I see is that as Andrew proposed, if you take employers out of that role, something has to fill the vacuum. Unfortunately, human nature as it is, my guess is that it would end up being the government in control of it, not the individual. HSA's will work for a certain segment of the population. However, it is probably not the portion of it most in need. It primary would benefit generally healthy people who have ability to set aside discretionary funds from their paychecks to offset some future healthcare expenses. It may be a small piece in a larger puzzle, but it really doesn't do anything to create real competition in the healthcare industry. That would cause many more problems than it could ever solve.
We need a radical overhaul of the system, not biting around the edges, if we really want to "solve" the issue. We definitely need to do something to promote an environment where real, interstate healthcare competition exists. The problem is that the drive has been towards mergers and consolidation, not with the promotion of competition. For starters, we need the ability to purchase healthcare from anywhere, with lots of choices, and preferably with significant portability. We also need to address the problem of the self-employed, whose current ability to purchase healthcare is nearly as bad as if some guy knocked on Blue Cross's door as said "can I get some insurance?" Many self-employed go without health insurance simply because the rates are obscene. If they get very sick, the business is likely to be the first casuality. In a free market, real competition drives down costs for consumers. Right now, we have a very restrictive environment where true competition doesn't exist. We need competition!
Posted by: Will at February 19, 2007 11:00 PM"The problem that I see is that as Andrew proposed, if you take employers out of that role, something has to fill the vacuum. Unfortunately, human nature as it is, my guess is that it would end up being the government in control of it..."
Will, that comment couldn't be more correct. In fact, you don't have to "guess"--that's an understatement. It's already happening.
RI now has a full-time health insurance commissioner who came, not from the private sector, but from RI's Medicaid program and played a critical role in creating RIte Care.
There are those in government who want to see a publicly-funded, universal healthcare system so badly that they are willing to engage in scare tactics and prevent private competition.
Liberals are trying very hard to convince people, particularly small buisness owners, that the private sector has failed them and that only government can solve the problem.
Everyone knows that our healthcare system is broken, so it's a valid fear to play upon. The irony is that these same liberals structure the law so as to prevent new companies from coming into the state.
While increasing competition would be good for the consumer, it would be moving the state to a less centralized, as opposed to a more centralized, health care system. And because it's easier to implement socialized healthcare in a centralized system, the liberals are content to keep competition to a minimum while working to gradually increase government regulation.
The only thing that has prevented RI from already having government sponsored healthcare is the cost. Medicaid and RIte Care are responsible for most of the deficit we face and state-sponsored healthcare would require heavy subsidies which the state can't afford.
Posted by: Anthony at February 20, 2007 12:17 AMAnthony,
It’s good to have you back commenting, but you’re wrong on almost every point. And you’ve pulled Will over to the darkside, joining Rhody, who (as much as we love him) hangs out there a lot.
You’re right on one point…
But you can’t build a competitive private sector starting from the employer-based insurance system. As long as people can’t walk away from a bad deal to find a better one, a competitive market cannot exist. Employer-based insurance is to a competitive insurance market what the old Soviet Union was to competitive elections – here’s your one choice, take it or leave it.The idea that individuals benefit from employer-based insurance is wrong on many levels.
1. Here’s the single most important point: It only seems like the cost of individual insurance policies is a tiny fraction of the cost of employer-based group policies. In reality, in employer-based plans, the employer takes money that is part of employee compensation, and hands it directly to an insurance company, without it ever passing through employee hands.
Since employees never see their money and don't have much choice as to where it goes, they psychologically think they are getting something for free. Individual insurance, on the other hand, feels more painful -- and would feel more painful, even if the cost was the same -- because 100% of the premium vanishes from an account or a paycheck that belongs to an individual employee.
2. Employer-based insurance doesn’t do anything to make risk pooling any easier or harder. If insurance was decoupled from employment, I could specify my job on an insurance application. Problem solved.
2A. And for many major medical expenses that most really need to be “insured” against -- getting cancer or some other disease, getting into a car accident, etc – type of employment is a minor factor.
3. The differences in price the do exist between employer and non-employer based policies have as much to do with government regulations, not economics or laws of nature. That’s why rates vary so widely from state-to-state. The people aren’t that different, the mandates and the community rating rules are.
4. The Federalism issue is a canard. The Rhode Island legislature could pass a law (maybe I shouldn’t give them any suggestions) saying that Rhode Islanders are only allowed to have refrigerators manufactured in-state in their houses, to park automobiles manufactured in-state in their driveways, etc. The supply would go way down, the price would go way up, and many people wouldn’t be able to afford whatever commodity we’re talking about.
(Then the RI Poverty institute would write a series of op-eds saying the only possible way to fix this problem would be to raise taxes to provide subsidies to the poor to buy refrigerators, automobiles, or whatever. “How can we justify not raising taxes, when the parents of small children can’t afford refrigerators!?!?” See the parallel here?)
Current laws preventing people from buying insurance policies they could afford are ethically and morally wrong, just as laws and regulations preventing people from buying a commodities they could otherwise afford would be morally and ethically wrong.
Posted by: Andrew at February 20, 2007 9:26 AMThere is no way this will be solved by the government. We need to have less government involvment. It needs to be solved via competition. COMPETITION IS GOOD! I would not suggest that it would be the end of all problems, but it would be better in the overall. There is no perfect solution, but there certainly are better ones. To cling to a proven failed system, because we have yet to discover the perfect system (that doesn't exist) is insane.
Posted by: Jim at February 20, 2007 10:31 AMFurthermore, having employers responsible for there employees health insurance is an absurd idea. If this is such a good idea, then why don't employers have responsibility for the employees auto insurance. It is a nonsensical idea that has gone unchallenged for way too long.
All this talk about competition to provide goods and services at a reasinable price is all well and good, but what about competition for employees? Particularly in a business like grocery stores, companies need to think about offering a compensation package that will attract the best workers available and keep their loyalty. That's an issue which sometimes gets lost.
Posted by: Rhody at February 20, 2007 11:20 AMIt depends what you value: a store where you get rock-bottom prices but raging incompetence and/or long lines at the checkout, the deli, etc., one where you get better service but you pay a little more for it, or some combination of the two. YMMV.
P.S.: I love using those clerkless scanners, but there are times when, even with a 12-15-item limit, they draw longer lines than the human cashiers (and then there are the issues the humans have to resolve on those pieces of machinery).
Andrew,
Your post oversimplifies the insurance industry.
Under your scheme, if I'm an insurance company selling to individuals and I see that you develop cancer, I could just drop you or raise your premiums incredibly high. Why should other healthy people subsidize your care just because you are sick? The whole point of insurance is to pool risk.
The comparison to auto insurance doesn't work, either. The state eliminates the highest risk drivers (DUI's, multiple traffic offenses, etc.) by suspending and/or terminating driver's licenses. The same can't be done with healthcare. Instead, the state covers some of the highest risk healthcare recipients.
Employers have a choice as to what health plan is the best fit for them. Employees can then choose to work for the employer or not, and many prospective employees make such choices depending on what health care coverage is offered as part of their compensation package.
The problem is that RI employers have too few choices when selecting health plans, not that employees have no choices.
Posted by: Anthony at February 20, 2007 2:18 PMAs long as it's not a public employee union, I don't care. If S&S gets too expensive or goes out of business, there's always Shaws, Whole Foods, Seabra...
When the private sector unions get too greedy, in the long run they screw themselves out of a job.
When the public sector unions get too greedy, and public officials are either incompetent or corrupt, the taxpayer gets screwed. Public sector unions should be outlawed!
Let the invisible hand do its thing in the private sector.
Posted by: Perry Ellis at February 20, 2007 5:16 PMGuess I'm still temporarily on the dark side, because I agree with Anthony again.
"The whole point of insurance is to pool risk."
We pool risk, because the liklihood of everyone in the pool all getting terminal cancer, a major illness, or all needing root canals at the same time or at all, is expontentially less than it is for a single individual, in which would essentially be a risk pool of one. Risk pooling allows risk to not only to be spread out over a wider group of people, but also over a longer period of time as well, because the pool is constantly being refreshed with new individuals, who are presumably also healthier. For instance, my chances as an individual of dying are roughly 100% (barring a miracle). However, the chances of everyone in a risk pool dying at the same time, or even in the same year, is expontentially less. The same concept works for home insurance. Everyone's house is statistically not going to burn down within a short period of time (barring a nasty "fire and brimstone" event).
Again, if the risk pool, which is the basis of every kind of insurance product, is decoupled from employment, then what would it be replaced with? There needs to be a mechanism that involves multiple individuals. If it doesn't, it really ceases to be true "insurance" (protection against a possible future event) and more of a personal "rainy day fund" (which is what HSA's basically are). HSA's are certainly a good thing, though they are especially great for those who have extra disposable income and whom are currently in optimal health. They are part of a comprehensive solution, but they are not themselves the solution. At present, you either have private (company-related) risk pools or you have public (government operated) risk pools. Unless you have an idea for some privately operated "third way" (possibly garnering you a Nobel Prize nod), I don't see this getting better soon.
Honestly, I don't like that the employer has to take on this role. If there were a legitimate, cost effective alternative, I'd be all ears. However, as I stated earlier, if you eliminate the role of the employer as essentially a manager of a risk pool, then barring the creation of some unknown entity, you'll end up with something government run and operated. My position on that is clear -- as Ronnie once said, "Government is not the solution to our problem, government IS the problem!"
Posted by: Will at February 20, 2007 10:13 PMWill:
If you ended employer risk pools, you’d end up with the same kind of risk pool you’d have for auto insurance, or homeowners insurance, or any other kind of insurance not sold through your employer. There’s nothing magic about employer based pools.
In reality, you’re not really in a risk pool with just your fellow employees; you’re in a risk pool with everyone in the state who has a policy with your insurer. If everyone in United’s Rhode Island based pool bought a policy directly from United, the risks would be exactly the same.
And the employer-based insurance system is a government program, where the government and the insurance companies have made a deal to outsource costs and paperwork and hassles to business owners like Roland and Jim – without compensating them for it!
Anthony:
No, an insurance company can’t just drop me for developing cancer, if I’ve insured against it. Insurance is a bet against a future event occurring, which the insurance company is obligated to pay, if the event occurs. An insurance company that tries to avoid paying legitimate claims they’ve contracted to pay should be liable for fraud, just like anyone who sells a product they have no plan to deliver should be liable for fraud.
Asking…
…is like asking why should other homeowners subsidize repairs to my house, just because mine is the one that burned down. The answer, again, is because that’s what insurance is – many people setting a little bit of money aside that can be used to pay for a few unfortunate events that might occur.Furthermore, people should have information available to them, like Insurer A denied 30% of claims last year, while Insurer B denied only 5% on a similar policy, and then be able to choose which company they want to go with, not be told they only have one choice and to take it or leave it.
Posted by: Andrew at February 21, 2007 9:08 AM"No, an insurance company can’t just drop me for developing cancer, if I’ve insured against it..."
Andrew, I don't think you fully understand how insurance works. When you purchase insurance, you enter into a contract with a finite term. After the term is over, your contract must be renewed and the insurer will normally make rate adjustments, decide whether or not to renew your policy, etc.
The only "future events" that the insurer is "obligated" to pay for are those events that occur during the term of the contract. The insurance company can drop you after the contract, (normally one-year for health insurance) expires. Treatments for diseases such as cancer can last several years, so it would be very easy for an insurance company to reduce risk by dropping cancer patients under your proposal.
My comment asking why healthy people should subsidize sick people was meant to be sarcastic and what I send in the next line--insurance is meant to pool risk.
As I mentioned, insurers have other tools to control risks other types of insurance.
People with DUI's, low credit scores, multiple traffic citations, etc. either have their driver's licenses suspended or pay significant amounts for insurance.
You mention homeowner's insurance, but the reality is that such insurance isn't really sold on an "individual" basis. Risk groups are formed by multiple factor such determining how close a house is to the water, age of the house, neighborhood location, etc. So while you may think that you're buying "individual" homeowners insurance, you're really not. You're being pooled with hundreds of other nearby homeowners.
One other note, employers can always use indpendnent insurance and benefit advisors who advise them on the best fit for their employees and handle the paperwork for a negligible fee, just as individuals use insurance agents.
Posted by: Anthony at February 21, 2007 10:01 AMHere is another thought: If health insurance were handled more like auto insurance where your own health determines your cost, people would take better care of themselves. When you can be a fat, lazy, smoking slob, and hide in a group for purposes of health coverage, what incentive is there to take better care of yourself.
Posted by: Jim at February 21, 2007 8:02 PMI think that this system has a lot to do with why American overall are so fat and out of shape.
Jim,
You're right. There is a trend in health insurance that is leading to offering incentives to people that engage in healthy behavior, have gym memberships, avoid smoking, etc.
This allows for some individualization within the group. Many policies offer this type of discount, although I wonder if the average employee is aware of it.
Sometimes you have "ask about it at work" as the AFLAC duck might say.
Posted by: Anthony at February 21, 2007 10:06 PMStop & Shop workers pay dearly for their health care; we have to pay $1,500 out of pocket plus $200 deductibles before major medical tests, etc., are covered in full, plus we pay co-pays for doctors of @20-$30 plus co-pays for medications in some cases 25% of the retail cost.
Over the past dozen years our raises have lagged behind the cost of living. I've looked at these $20-$30 rases as a trade-off for health care. Our plans get downgraded with every contract. Until a recent change occured, we could only get blood drawn through a single lab without paying 10% of that. You go see your doctor and then need your labs done where there is questionable quality control, and I can't tell you how many times the results are not sent to the doctor.
As for the pension, please do not confuse our pension with the public sector; with 22 years of service my pension would be $1000 per month. The company has been adding $69 dollars per year, hardly a princely sum.
Stop & Shop is second after WalMart for having its employees on MassHealth (here in MA, anyway) because of the 2 year wait for new hires. This not only penalizes them but lessens the pool of funds available to be paid out for members who do get sick, leading to the diminution in benefits with successive contracts.
A full-timer hired today will make the equivalent hourly wage I made 20 years ago. S&S made over 700 million in profits last year; do you think none of that should go to the people who made that happen???
Have your facts correct before you trample on us any more than some of you already have.
Posted by: Donna at March 8, 2007 11:05 PMAny one who uses those self service check outs should stop and think that they are putting someone out of work
Posted by: joan smith at February 27, 2010 6:49 PMAny one who uses those self service check outs should stop and think that they are putting someone out of work
Posted by: joan sheridan at February 27, 2010 6:50 PM@Will
With most shopping markets loosing money, example shaws closed all there CT stores , with Stop and Shop buying out 5 of them , Price Right bought out the rest , and some were closed all together. Stop and Shop made 1.6 billion $ last year. One of there most profitable years ever. If they weren't making money and shutting down slow stores , i would think that they have every right to cut back. But they are only cutting back to put more money in there bonus checks and to increase profits even more. Not to mention Stop and Shop is owned by a European company they could care less about the people that work for them.
Posted by: Pat at March 4, 2010 12:30 AM