Competition, high insurance costs block compromise. (Long article but good)
By RUSS MITCHELL
The New York Times
BERKELEY, Calif. -- Draped in a blue apron, a supermarket clerk squatted on a parking lot curb, taking a break from work at a Safeway supermarket in an affluent neighborhood here.
"I make about 10 bucks an hour," he said. "I don't know how they expect us to pay for health care out of that."
The clerk, who is single and in his 50s, said he had little money left after paying rent on a small apartment in what he called the "low-rent end" of nearby Alameda, where one-bedrooms bottom out at about $800 a month. He is upset that his employer wants him to pay more for health insurance, but he said he would rather not give his last name because of "all the strike talk and all." Does he expect a strike? "Could be," he shrugged. "We'll see."
With bitter memories of a long strike still fresh, the supermarket industry faces a new showdown between labor unions determined to hang on to health insurance benefits and management that is girding to meet increased competition from low-cost rivals like Wal-Mart Stores.
The same issues were behind the 41/2-month strike and lockout in Southern California that ended in February, attracting national publicity and leaving both sides exhausted. Nearly 60,000 union workers lost a third of their annual pay, while the parent corporations of the grocery chains -Albertsons, Safeway and Kroger -- shed $1 billion in profits, much of it spent trying to lure customers back into their stores with price promotions.
Now the attention has shifted to Northern California, the next stop on a patchwork of regional negotiations. Scarred by the Southern California experience, both sides will try to avoid a strike. But compromise will be hard to come by.
Unionized supermarket chains have been paying 100 percent of most workers' health care premiums for decades, and Steven A. Burd, the chairman and chief executive of Safeway, says they have "become a runaway cost, not just for us, but for industry in general."
The days when supermarkets could tolerate the costs ended with the arrival of nonunion competitors, especially Wal-Mart, he added. Supermarkets need to deal with the issue "before we find ourselves in the same situation as the airline industry," rife with layoffs and bankruptcy, Burd warned. He likens the competition from Wal-Mart to airline industry competition from JetBlue. (Albertsons, the other major party in the Northern California negotiations, declined to comment.)
The issue is not unique to the supermarket industry. Negotiations between the United Auto Workers and Caterpillar Inc. are bogged down over who will pay for health benefits. In San Francisco, service workers are striking against major hotels; the top issue there, too, is health benefits.
Richard L. Benson, president of United Food and Commercial Workers Local 870 in nearby Hayward, placed more blame for the problem on nonunion chains and on the health care industry than on Safeway and Albertsons. But, he added, "we are not going to allow the solution to be `pass the cost on to employees, and then let's move on.' "
The costs are substantial, and growing. While consumer inflation ticks along at 2 to 3 percent, driven mostly by volatile markets for oil, health insurance premiums have climbed more sharply. They increased 14.7 percent in 2003 and are expected to grow 12.6 percent this year, and although inflation is forecast to slow in 2005, double-digit increases will be the norm for years to come, according to Hewitt Associates.
"Employers can't take on 12 to 14 percent annual increases in health care," said Tom Beauregard, a health care consultant at Hewitt. "The cost increases we see are not sustainable."
As a result, employers -- the main providers of health care coverage in the United States -are shifting more benefit costs to their workers. Hewitt reports that while employers' shares of health care spending will hold steady this year, workers will see their average annual contribution for family coverage rise to $1,565, from $1,276.
As President Bush and Sen. John Kerry argue over health care at the national level, individual states are having their own debates. In California this fall, voters will be presented with Proposition 72, which would require companies with 200 or more workers to pay at least 80 percent of the health care premiums for employees and their families; companies with 50 to 199 workers would have to offer insurance only to employees. If they did not buy insurance on their own, employers would pay into a state-run system that would provide private insurance.
The measure was driven in part by two recent studies at the University of California, which concluded that the low wages and benefits at chains like WalMart were forcing workers into welfare programs that cost the state nearly $3 billion. The Legislature's budget analysis group, however, said it could not estimate if the proposal would save the state any money.
Even under the kinds of programs that would be offered in Proposition 72, employers would continue to be the primary provider of health insurance. James C. Robinson, a professor of health economics at the University of California, Berkeley, said the focus on issues like premium payments missed the larger point: that health care costs would continue to rise, meaning that insurers and employers would need to offer a variety of health plan options with different benefits and costs.
"The employers' job is to make good options available to employees and the tools to help them decide," he said. "If you choose the higher-cost option, you'll pay more. If you choose the lowercost option, you'll pay less. Just like everything in life."
The trouble, Robinson says, is that most companies -- Safeway and Albertsons included -- do a minimal job of providing those options and tools. And employees wonder whether they can afford even the cheapest plans.
President Bush has made health savings accounts one of his central campaign remedies for the nation's health-care problems, but so far employers and workers have been slow to accept the accounts as an alternative to conventional health insurance.
People around the nation are now taking part in the annual enrollment season for health care plans, but only a tiny fraction of employers are offering the new plans. The plans let workers create tax-free savings accounts to use for medical costs, combined with lower-cost, high-deductible insurance to cover major medical care. Most employees who already have health benefits said in an insurance industry survey that they would be reluctant to switch even if they were offered one of the new plans.
The UnitedHealth Group, for example, the nation's largest health insurer, representing employers who cover more than 18 million workers, expects only about 150,000 of those employees to choose health savings accounts for 2005.
The plans, which were inserted without full House or Senate debate into last fall's 700-page Medicare legislation, are meant to provide basic, high-deductible insurance while letting people accumulate money tax-free to be spent on medical services or saved to pay for future health care needs.
Nonpartisan health policy experts say the plans are apparently too new and untested to appeal to many employers and may simply not be financially feasible for middle-income families.
"It's hard to imagine that a guy who makes $50,000 a year is going to have $2,000 for him and his family to stick in this plan," said Ira S. Loss, a health policy expert with Washington Analysis, a business consulting firm.
Insurance brokers say the accounts appeal primarily to lawyers, doctors and partners in small businesses who may welcome tax-free savings accounts for themselves. Many small businesses may like the plans as a way to reduce their own outlays for employee health insurance.
But a drawback for employers, experts say, is that workers can take their accounts with them when they change jobs -- undermining the employee loyalty and retention companies seek to cultivate by providing health coverage in the first place.
Posted by UFCW 227 at October 17, 2004 04:48 PM