Starbucks Finds Doing the Right Thing is Hard

Discussion
Sep 15, 2005
George Anderson

By George Anderson


Starbucks’ Howard Schultz says even companies such as his that are trying to do the right thing by offering healthcare coverage to employees have come to the conclusion they simply cannot keep it up.


According to the chairman of Starbucks, the coffee chain has seen its insurance costs increase in the double-digits for four straight years and the escalating costs are not something it or any other company could continue to sustain.


Mr. Schultz was in Washington, D.C. yesterday to meet with Congressional leaders and urge them to put healthcare at the top of their legislative agenda. Other retailers attending the meetings including Jim Sinegal, chief executive of Costco, and Dawn Lepore, president and CEO of drugstore.com.


While he did not endorse specific legislation, Mr. Schultz told The Associated Press that whatever law was finally passed had to achieve a bottom line goal. “Every single American needs to have access to health insurance – full-stop,” he said.


Moderator’s Comment: Do you agree with Howard Schultz that businesses can no longer sustain the annual increases they are seeing related to employee
healthcare? Do you also agree that every single American needs to be insured? What is the answer to his national crisis?


A study by the Henry J. Kaiser Family Foundation found the average annual premium for family health insurance coverage rose to $10,880 this year. Employers,
on average, were picking up $8,167 of the tab. The amount employees pick up is now $2,713 compared. This figure is up from $1,094 five years ago.

George Anderson – Moderator

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19 Comments on "Starbucks Finds Doing the Right Thing is Hard"


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Perry Cheatham
Guest
Perry Cheatham
15 years 5 months ago
It is not as simple as it seems. I am in charge of healthcare for a small company; about 350 employees. I have spent a majority of my time the past couple of years becoming as knowledgeable as possible. In my opinion, the health care system isn’t so wrong itself; it is all the layers that are attached to the system. We used a traditional broker up until this year. Our broker used to make 6% of our plan for their services. Not that they shouldn’t make money if we utilize their services, but there are alternatives and we utilized those to gain control. We went on a self insured plan where we are responsible to pay the claims. We have a TPA that administers that claims and we pay the bills. I will tell you that it has been an eye opener. But here is the deal. We were faced with a 33% increase this year if we stayed with our fully insured carrier. We rolled the dice and we are going to pay… Read more »
Stephan Kouzomis
Guest
Stephan Kouzomis
15 years 5 months ago

Mr. Schultz, being a stellar consumer advocate, and having a culture that makes its personnel love to work at Starbucks, is trying to blow the whistle for help, for all Corporations.

Don’t know what the Govt. should do, or can do, but somebody better talk to Health Corp. to look at overhead, and be more efficient, without ridding personnel.

Look what Wal-Mart did in its distribution and inventory area…. but how poorly they’ve acted for medical coverage to its employees.

Sure working people should have it easier to secure health insurance. But, probably, they should help to pay. Hmmmmmm

Herb Sorensen
Guest
15 years 5 months ago

The single most urgent need is for Americans to share in the payment for their healthcare on a per-use basis. Simply sharing the cost of insurance delays a solution, and adding more people to the insurance system just makes the problem bigger.

The only solution I see on the table is the Health Savings Account (HSA) option. With this, the employer essentially puts “X” amount into an account that the employ can use to buy a high deductible policy, using the balance of the account to pay lower cost expenses themselves – or roll any balance at the end of the year into a personal retirement account.

This works to save money for two reasons. (1) It can remove a lot of day-to-day administrative cost by having the user make payments for the services they use – usually with a special HSA debit card. (2) It provides an incentive to NOT spend, or to seek lower cost options – savings go straight to the users retirement account.

Ron Margulis
Guest
15 years 5 months ago
I have been paying my own insurance for a decade and the premium is now three times as much as it was in 1995, the co-pay for both visits and prescriptions is now three times higher and the deductible is twice as much. The only good thing is that I can now deduct the premiums as a business expense. So, yes, I agree that businesses can no longer sustain double-digit healthcare premium increases. As to the answer, I’m convinced the supply and demand for healthcare is out of wack; there is nothing in the system, no incentive for insurers and others, to bring it back into alignment. As we saw with the S&L crisis in the 1980s, both sides of the spreadsheet have to be addressed simultaneously. (BTW, the failure to address the demand side of the issue was the primary reason Hilary Clinton’s efforts were unsuccessful last decade.) A framework needs to be put in place so the various publics can collaborate on a solution. The current administration is so far into the pockets… Read more »
Elly Valas
Guest
Elly Valas
15 years 5 months ago

Mr. Schulz’ message should be heard loud and clear. When a company pays more in health insurance than they do for the raw materials to make their product, something is wrong.

On the other hand (and I rarely take the side of the insurers), we also have way more products in the health care arena than ever before. We have more drugs, more testing, more sophisticated equipment, more medical specialties.

Those with health insurance have access to more benefits while those without it can barely buy BandAids.

The division between the “haves” and the “have nots” is too wide to be sustained much longer.

Perhaps the solution lies somewhere in the middle where insurance covers a minimum base of services but is affordable to all.

Mark Lilien
Guest
15 years 5 months ago
Universal health care is unlikely to be achieved in one step. For example, when Social Security was mandated in the 1930’s, it omitted many people from coverage. As time passed, many of those who were left out were added. Given the philosophy of those in power in Washington, it’s unlikely that anything will be done on a national level, unless the Democrats regain dominance. The best hope for universal health care is on the state and local levels, since in many states and localities, the politicians involved are “reachable.” It would only take a few localities or a few states to enact legislation, and dozens of states would follow within a couple of years. There would be fears about discouraging new business relocations to those areas, but fears related to the health care crisis may loom larger. Starbucks and other health care-providing employers would be able to afford their benefit plans if the competition had the same costs. Even if half the states ended up with universal health care coverage, we’d all be much better… Read more »
Eric Gault
Guest
Eric Gault
15 years 5 months ago

David Livingston’s on the right track. What’s needed is personal responsibility. All those in favor of gov’t nationalizing health care only need to see how well it’s working in Canada, England, etc. The care is terrible, the waits are long, and the system is going broke – which will require more taxes paid into it by the citizens.

Jeff Weitzman
Guest
Jeff Weitzman
15 years 5 months ago

This argument always ultimately comes down to whether health care should be a privilege or a right. The purpose of a society in the first place is to come together for common benefit: should law enforcement be a private matter? Apply David Livingston’s libertarian argument to that realm: We should only have enough police officers to track down murderers. For thieves, everyone should hire their own private security force.

All I know is that something is definitely broken. Our health insurance costs have increased by double digits every year I’ve been at Coupons, Inc. For a small company whose primary costs are labor-related, it hurts. It means that even if I don’t give anyone a raise, my labor costs go up dramatically every year. Do my employees understand that if they get a 2% raise and their health care contribution does not rise, their compensation actually went up more like 12% in some cases? Not really.

Robert Straub
Guest
Robert Straub
15 years 5 months ago

I just wanted to comment on my experience with nationalized healthcare while working in the Czech Republic.

I didn’t have to wait forever for appointments, etc.
The customer service was poor, but it is in every industry in Eastern Europe. Most, importantly, the care was very good. It was a pleasant surprise to go to the dentist and get my dental work done the same day without a half dozen unnecessary visits.

My experience is that the US is the place to be for a catastrophic illness, but we don’t get the small stuff right.

Tillman Estes
Guest
Tillman Estes
15 years 5 months ago

The answer to the first half of this question – should the businesses absorb the cost of Health Insurance – in my opinion is yes. As an individual, my career choices have been based as much on benefits as it has on salary. While the job satisfaction is important, sustaining my family is the highest need.

Changes in the way companies are taxed and/or incented can help insure every American. Health insurance is indeed a cost of doing business. Healthy workers add to the bottom line, not a cost. Controlling the high costs and abuses within the medical field (including costs associated with our litigious society) need to be addressed simultaneously. It’s a much larger question than should only the business bear the burden of the health of our country. The health of American workers, exempt and non-exempt alike, is in the best interest of our country as a whole. I’m not at the point of advocating a National Health Plan, but I am getting very close.

David Livingston
Guest
15 years 5 months ago

I think if companies got realistic and just raised deductibles to $2500 per person, it would lower the cost of insurance. Then consumers would spend their health dollars more wisely. HEB has opened some clinics in some of its stores and provides a menu with prices for common medical procedures. I think most of us are too spoiled to put up with insuring everyone in a single payer system. The fear is, if everyone got health insurance, it would be abused and the waiting rooms would be clogged up with abusers. However, I think everyone should be insured but only for catastrophic events.

Warren Thayer
Guest
15 years 5 months ago

Ron Margulis for president.

Mark Barnhouse
Guest
Mark Barnhouse
15 years 5 months ago

Promoting wellness is cheaper than paying for illness. Our whole mega-pharma-medical complex is geared up to be as profitable for the stockholders of the hospital chains, pharmaceutical and medical equipment companies as possible, and to keep the money machine going, the interested parties have to de-emphasize simple things that the average person can do to prevent the need for frequent doctor visits, expensive tests, etc.

Eating well, getting adequate exercise, and avoiding addictions are choices every person makes or does not make–we can’t penalize those who make the wrong choices, but we can’t all pay for all of their mistakes either. What we can do is reward those who make the healthy choices–much lower rates and much smaller individual co-pays and deductibles for non-smokers and people without DUIs or drug offenses on their records. Economic incentives won’t work on 100% of smokers, heavy drinkers, or drug addicts, but lower rates would provide a positive impetus for change.

George Anderson
Guest
George Anderson
15 years 5 months ago

If a lie gets told often enough, people begin to believe it’s the truth.

One such lie is that the U.S. has the best healthcare in the world. The real story is that America ranks behind Singapore, the United Kingdom, Switzerland, Germany, Australia and Canada in the quality of healthcare delivered to its citizens, according to the World Health Organizations and others.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
15 years 5 months ago

Herb, the single most urgent need in healthcare cost containment is not “for Americans to share in the payment for their healthcare on a per-use basis.” Instead, the most urgent need is the elimination of provider middlemen and the streamlining of paperwork. In our work in the California Workers Compensation system, we’ve accomplished both with several large clients (including the City Of San Francisco), resulting in annual savings of up to 50%.

Further, Jeff Weitzman, healthcare has nothing to do with privileges or rights unless you have a stake in socialized medicine. Rather, it’s about availability and affordability. Historically, as healthcare becomes more available and affordable, concerns about privileges and rights subside.

Before we go “total Canadian” on healthcare, we need to educate America regarding the actual layers of cost involved in the average doctor visit or prescription. The pork (and lobbyists) is everywhere.

Mark Burr
Guest
15 years 5 months ago
The fact is that Mr. Schultz, Mr. Scott and others (I’d mention the CEO of General Motors, but they are irrelevant nowadays) are the most likely to have the single handed ability to reduce health care costs than any other source in the US. I invite those who believe the World Health Organization is a good source of health care quality to pick their next physician for them. While they are at it, they can get an explanation for why so many come here from the nations mentioned with ‘so-called’ free care for their treatments. Banded together, the major corporations could reduce the costs of health care over night. However, due to the lack of leadership, they’d rather blame the government which is less of a provider or an insurer in the system than any other provider. It’s not about politics; it’ not about co-pay levels of the insured; it’s not about those who have and have not; it’s simply about the price that is willingly paid for unmatched care. To date, there has been… Read more »
Bernice Hurst
Guest
15 years 5 months ago
Seen from a long distance, outside, objective perspective, there are lots of reasons why the American healthcare system is in such deep hot water. One of them is the history of employers subsidising insurance. People who paid little or nothing grew to feel entitled to run to one or more doctors every time they had anything wrong with them. It has always struck me as odd when people refer to “my internist”, “my gastroenterologist”, “my whatever”. Why does everyone need to have their own personal specialist of every type? No wonder costs went up. Having established such a pattern, it is obviously difficult to break. Similarly, having allowed drug companies to advertise to consumers for years about the wonders of their pills, and sent them rushing off, yet again, to their doctors, it’s going to be difficult to wean them off expectations of quick cures. No wonder drug prices stay high; everyone wants them. Everyone wants a pill or medication for everything. I’m not sure how much coverage the British system gets over there, and… Read more »
David Livingston
Guest
15 years 5 months ago
Why do we put up with paying $10,000 to $15,000 a year for family health insurance? Because most of us can and will. Is health insurance a right? No. Should every American have access to health insurance? Yes, but only if they’re responsible and step up and pay for it. So far Americans have chosen not to have universal coverage – probably for selfish reasons. Nobody wants to spend an entire day in a waiting room full of poor people who all want to see the best doctor in town. Perhaps some view universal health care as a program that prolongs the lives of unproductive citizens. If we want access to the latest and greatest advancements in health care, then we are just going to have to pay for it. When I was a teenager and had to go to the hospital, it was drab and sterile. Now hospital rooms are like hotel rooms with a nice décor, DVD players, cable TV, and room service. Should that be a right? My wife wore out her… Read more »
Jeff Weitzman
Guest
Jeff Weitzman
15 years 5 months ago
Michael, I disagree. This *is* about rights and privileges. It is not about socialized medicine. How you provide health care and how you pay for it may be shaped by how you decide to think about the relationship of healthcare to society, but it is not the same question. Socialized medicine is *not* the natural by-product of thinking about health as something that a society has an interest in. Our country was founded on the principle that every citizen has a RIGHT to life, liberty, and the pursuit of happiness. Again, I argue that we must therefore at least ask the question of what those words mean in terms of the way to construct our society, and health is certainly tied into all three of those rights. All the talk about waiting rooms full of poor people and socialized medicine is hogwash. It presumes that the answer is to simply spread the cost around and allow anyone to ask for any care they want. That’s one solution, but hardly the only one. Dr. Banks’s work… Read more »
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