Reality Check in Aisle 3: Safeway Has No Place In California’s Health Reform Debate

Perhaps the most hypocritical element of California Health Deforminator Model ABX1 1, the deal forged between Gov. Schwarzenegger and Assembly Speaker Nuñez, is the omnipresence of Safeway CEO Steve Burd at the governor’s side whenever he talks up the so-called “reform”. Mr. Burd has become the governor’s number one corporate cheerleader for ABX1 1. Well, everyone has a right to his opinion, wrong though it may be…… But wait a minute……

What the heck does this “reform” have do to with Safeway?

Safeway is not governed by California’s health insurance regulations, because it is a large, self-insured employer. A federal law, ERISA (Employee Retirement Income Security Act of 1974) pre-empts state regulation for self-insured employers. So, why is Mr. Burd sticking his nose into a reform that’s none of his business?

Safeway struggles with health care liabilities: although it has tried to introduce consumer-directed reforms in its employees’ health plan, the powerful United Food & Commercial Workers Union (UFCW) manages to hinder significant changes. Last week, Safeway got a new contract with UFCW. According to one union boss in San José, it “bucks the national trend in which employers are cutting benefits and shifting the costs of health care to employees.” (In other words, the UFCW has negotiated a contract that prevents Safeway from giving a significant share of health care dollars to employees so that they can take control of their health care decisions.)

Currently, smaller competitors in California are still free to offer health benefits more responsive to their and their employees’ needs (although the state’s small-group market is very over-regulated, as I argue in a soon-to-be-published paper). The only reasonable reason for Mr. Burd’s willingness to invest his valuable time supporting ABX1 1 is to burden his competitors with costs that he cannot shake out of his union contract.

Notably absent from Gov. Schwarzenegger’s corporate cheerleading squad is one of Mr. Burd’s major competitors, John Mackey of Whole Foods. Perhaps Whole Foods is too busy being an innovative grocer to spend resources lobbying the state to weigh down its competitors with an expensive burden like ABX1 1. And perhaps it has something to do with the fact that Whole Foods is a pioneer in developing a consumer-directed health plan for its non-unionized workforce – and cutting health costs, to boot.

Mr. Burd’s Safeway has the freedom to opt out of expensive state regulations like those proposed in ABX1 1. Unfortunately, small businesses that do not have enough employees to manage the risk of self-insuring cannot. Why should they also pay for Safeway’s inability to negotiate a favorable contract with the UFCW?

Californians need a way to free ourselves from this potentially disastrous “reform” that the Iron Triangle of Big Government, Big Business, and Big Labor are trying to shove down our throats. We need a federal law like Rep. John Shadegg’s Health Care Choice Act that allows every American the right to buy health insurance from any state of his choice.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top