Why We Still Pay For Health Insurance In Full For Every Employee

Last month I had a dentist appointment. The dental hygienist – who I’ve known for my entire life – was asking me how business was and we eventually got on the topic of health care costs. I mentioned that our plan was being canceled and we had to pick a new plan for 2013. After quite a bit of research we were able to find a pretty good new plan. Of course, it’s still significantly more expensive than the old plan and has significantly worse coverage. Since we set up our health insurance in early 2007, costs per employee have roughly doubled. I mentioned that we still pay for all of our employee’s health and dental insurance in full. She said something along the lines of “you won’t be able to continue to do that, eventually you’ll go broke!” I responded that we’ll do everything in our power to continue to do it for as long as we absolutely can.

Why? Because it’s a core value of our company. We believe that people shouldn’t have to worry about whether or not they’ll be able to afford health care. We believe that providing this benefit is a critical building block in the structure of a great organization. Core values shouldn’t be compromised to save a few bucks.

Last week I read this great quote from Starbucks CEO Howard Schultz. Even though they’re a gigantic publicly traded company and we’re a tiny private company, I couldn’t help but draw a few parallels:

In 2008, Howard Schultz returned as Starbucks’s CEO to turn around the company. Early on, he had to fend off investors’ requests to slash Starbucks’s benefits, which had made it the model of an enlightened, post-union era company.

“Our stock was in free fall. One day, I found myself on a phone call with one large institutional shareholder. He addressed the longstanding health coverage for our employees, which at the time cost $250 million. He said this would be the perfect time for Starbucks and me to cut health care. Many companies were doing this at the time, so I would be immune from any public outcry.

I tried to describe to him that the essence of the brand is humanity, and our culture is steeped in two primary benefits that have defined who we are: comprehensive health-insurance coverage for our people and equity in the form of stock options, which we give to anyone who works more than 20 hours a week. I told him, ‘This is a nonstarter at every level because you don’t understand the essence of our company.

After all these years, if you believe the financial crisis should change our principles and core purpose, perhaps you should sell your stock. I’m not building a stock. I’m trying to build a great, enduring company.’ We are a performance-driven organization, but we have to lead the company through the lens of humanity.”

7 comments on Why We Still Pay For Health Insurance In Full For Every Employee

  1. Rob says:

    If only your politicians were as enlightened!

    As a Brit it boggles the mind how you have to worry about healthcare. Not being able to afford medical care simply isn’t something the vast majority of people have think about here. Sure there’s the odd fringe case which sucks, but in the main if you need to see a doctor or go to the emergency department you just go without thinking about cost or coverage. If you want a shiny private room you can pay to upgrade. I hope one day the rest of the world doesn’t have to give it a second though either.

    The collective principle asserts that… no society can legitimately call itself civilised if a sick person is denied medical aid because of lack of means.
    —Aneurin Bevan

  2. Tim says:

    Rob you bring up a good point, one of the key differences between the US and virtually every other country in the US is litigation is rampant. I recall reading a stat that the average physician in the US has to carry mal-practice insurance that costs just shy of $100k per physician annually. While that’s no excuse, it’s definitely a factor that the rest of the world doesn’t have to cope with.

    Insurance is enormously profitable business too, Warren Buffet is heavily invested in insurance as are a multitude of the ultra wealthy. In the area Adam lives in a gentleman, recently retired from the healthcare insurance business, built the third largest privately owned home in NYS (9th largest in the US) and is one of the wealthiest men in the area, if not the single wealthiest. While there are extremes on any side, it seems a number of the ultra wealthy have heavy ties to insurance. Insurance providers run as close to the way the US Government operates, which is obviously not an effective way to operate. Fortunately the Insurance companies need to operate in the black or the exec’s will be canned (novel idea the government may want to think about!) so they continue to increase profits, reduce expenses and make money. I’m all for an individuals ability to make a living, it just seems insurance isn’t necessarily fair.

    It is a sad state of affairs when healthcare is very questionable and the only way for an individual to be able to afford anything beyond bare minimal healthcare expenses is to have questionable healthcare insurance, welcome to the USA! While I think reform is needed, relying on an organization (the federal Government) that has a track record of nothing but inefficiency and operating in the red is probably not the place to find the solution.

    • Rob says:

      It certainly seems that the US is more litigious than most other places, though unfortunately it’s becoming more prevalent here too. We went through a stage a few years ago of having companies touting for business on the street, asking if you’d been in an accident etc. and offering “no win no fee” type services. Thankfully new Solicitors Regulation Authority rules brought in in 2011 put a stop to that, but I’d say we’re certainly more ready to sue for things than we were 10-15+ years ago and it’s sad when it makes people scared to do things.

      In terms of the doctors – it depends how litigation is used. On the one hand if someone has suffered because of malpractice and the money will help to make that right then that’s a good thing, but when it becomes not a good thing is when it’s simply used to “punish” the doctors or puts unnecessary stress on them or is used for profit. It’s all a bit of a racket really – the New Zealanders are heading in the right direction with the ACC.

      In terms of state healthcare in the US – it’s far too complex an issue for me to understand, however it seems that most people think that the current system isn’t fair.

      • Tim says:

        I agree entirely with the complexity of this issue. The difference between us and them, we realize we don’t know the answer, they charge ahead blindly acting as if they really know the answer.

        • Adam McFarland says:

          Good conversation guys. Agreed completely on the complexity of the issue. I too don’t have a strong opinion on the “right” answer, I just hope that we come upon it sometime in my lifetime. I love Rob’s quote from Aneurin Bevan, that sums up how I feel personally.

  3. Darrin says:

    Glad to see politics hasn’t got in the way of you taking care of your people. If only big biz could say the same….

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