The Stop & Shop Strike: Important, Yet Just a Distraction

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?

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Jim
Jim
14 years ago

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.

Rhody
Rhody
14 years ago

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.

Will
14 years ago

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.

Anthony
Anthony
14 years ago

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… Read more »

Rhody
Rhody
14 years ago

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.

Will
14 years ago

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… Read more »

Anthony
Anthony
14 years ago

“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.

Jim
Jim
14 years ago

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.

Rhody
Rhody
14 years ago

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).

Anthony
Anthony
14 years ago

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.

Perry Ellis
Perry Ellis
14 years ago

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.

Will
14 years ago

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… Read more »

Anthony
Anthony
14 years ago

“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.

Jim
Jim
14 years ago

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.

Anthony
Anthony
14 years ago

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.

Donna
Donna
14 years ago

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.

joan smith
joan smith
11 years ago

Any one who uses those self service check outs should stop and think that they are putting someone out of work

joan sheridan
joan sheridan
11 years ago

Any one who uses those self service check outs should stop and think that they are putting someone out of work

Pat
Pat
11 years ago

@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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