Controlling Moral Hazard to Reduce Health Care Costs

Remember this post about an interview with Vanderbilt's Larry Van Horn regarding how to control health care costs? Somebody at Safeway must have been listening. By charging employees more for their "bad" behaviors (actually the company is smart enough to frame the program as discounts for those who don't engage in the behaviors), Safeway has kept its health care costs flat over the last four years.

[The] plan utilizes a provision in the 1996 Health Insurance Portability and Accountability Act that permits employers to differentiate premiums based on behaviors. Currently we are focused on tobacco usage, healthy weight, blood pressure and cholesterol levels.

Safeway's Healthy Measures program is completely voluntary and currently covers 74% of the insured nonunion work force. Employees are tested for the four measures cited above and receive premium discounts off a "base level" premium for each test they pass. Data is collected by outside parties and not shared with company management. If they pass all four tests, annual premiums are reduced $780 for individuals and $1,560 for families.