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Now on Starbucks' menu: Less health coverage

By David Lazarus
Los Angeles Times, July 12, 2016

Starbucks announced Monday that it will give its U.S. workers a raise that will boost compensation by 5% to 15%. That’s very cool.

The coffee giant also said it will offer employees more affordable health insurance that will cut costs by being less comprehensive.

That’s not so cool.

What it represents is the ongoing trend of tiered healthcare in this country – strong coverage for those who can afford it and high-deductible, primarily catastrophic coverage for most others.

“This is great for Starbucks’ healthier workers and for shareholders,” said Peter Hilsenrath, a healthcare economist at University of the Pacific. “But sicker workers likely will have to pay more.”

The problem, he said, is that without healthier employees helping to subsidize the company’s more comprehensive health plans, rates will go up for those desiring (or requiring) more coverage.

“You could say Starbucks is exacerbating a problem that we’re also seeing on the insurance exchanges” under the Affordable Care Act, Hilsenrath said. “Costs keep rising for people who need more coverage because the healthier people choose cheaper, high-deductible plans.”

Champions of free markets will argue that Starbucks is simply giving workers more choices, and that’s true. Why should younger, healthier people pay higher premiums for more extensive health coverage?

In a letter to workers, Starbucks Chief Executive Howard Schultz said the company is “evolving” its benefits program so that employees (or “partners” in Starbucks-speak) “may shop, compare and choose health coverage with the similar convenience and personalization people experience when they shop, compare and choose airlines and airfare.”

“The new healthcare options allow partners to only pay for the coverage they want and will actually use,” he said.

Starbucks estimates that the lower-cost, less-comprehensive insurance plans will save individual workers up to $800 a year, or $2,600 for those with family coverage.

That sounds good in theory. In reality, however, it undercuts the basic premise of health insurance – that the potentially huge costs of healthcare can be minimized on an individual basis by spreading risk evenly among as many people as possible, healthy and sick.

“Employers have been looking to manage the growth in healthcare benefits for a long time, so increasing deductibles and reducing benefits are two common methods,” said Gerald Kominski, director of the UCLA Center for Health Policy Research. “The Affordable Care Act establishes relatively minimal standards for larger employers, so this could be a trend.”

Reggie Borges, a Starbucks spokesman, declined to elaborate on the company’s plans. “We will have more benefits news to share in the weeks ahead, including more choice and savings potential, which means more money in our partners’ pockets,” he said.

Kominski said the move represents “an erosion of benefits” and a segmenting of a company’s workforce because it can “lead to higher premiums among those older or sicker employees who stick with the more generous coverage.”

Think of it like this: It’s the healthy, in looking out for themselves, unintentionally sticking it to the sick.

Free marketeers may not fret about that until they, too, require healthcare. And rest assured, they will.

Unless you’re Superman, you will, at some point in your life, need medical attention.

Americans spend about $3 trillion annually on healthcare, an average of nearly $10,000 per person. But actual costs depend in large part on how old you are.

People between the ages of 65 and 84 spend roughly 3.5 times as much annually on healthcare as people between age 19 and 44, according to the Centers for Medicare and Medicaid Services.

According to the Health Care Cost Institute, Americans age 65 and older can expect to pay about $146,400 out of pocket for healthcare until their dying day – and that’s for the relatively healthy ones. Those with a chronic medical condition can expect to spend more than $300,000 above what Medicare will cover.

This is the fundamental idea behind proposals for a Medicare-for-all insurance system, or the single-payer approach that’s favored by almost all other developed countries. They typically spend about half what the United States spends on per-capita healthcare for the same if not better results.

The genius of the single-payer approach is that by pooling the healthy and sick over the long haul, comprehensive coverage costs for all can be brought down to affordable levels.

Don’t blame Starbucks for looking after its own. The company’s first obligation is to its employees. And Starbucks deserves credit for embracing a variety of socially conscious policies, such as a commitment to environmental protection.

But healthcare is unique. Unlike other goods and services, it’s something that represents enormous importance to the entire public. The more we focus on tiered coverage for individuals, the more we harm the broader interests of society.

Ideally, we’d all have Venti or Trenta coverage. But the way things are going, many of us will have to settle for Tall.

And that’s just a sneaky way of saying small.

http://www.latimes.com/business/lazarus/la-fi-lazarus-starbucks-health-insurance-20160711-snap-story.html