Skip to comments.Whole Foods-Style Health Care
Posted on 08/22/2009 6:04:09 AM PDT by frithguild
I've written several columns over the last couple months about the attempts by Obama administration and the Democratic-controlled Congress to impose nationalized health-care insurance -- so-called "Obamacare." I've said it's bad for corporate profits, bad for the stock market, bad for the economy -- and even bad for people seeking quality health care.
I've never had such a huge volume of reader response to anything I've written here, and never so polarized. To half of you, I'm a messiah. To the other half, I'm a pariah. So I was glad to find support in this perilous position from one of my favorite CEOs, John Mackey, who runs one of my favorite companies: Whole Foods Market (WFMI: 28.78, +0.93, +3.33%).
Before I get into how Mackey and Whole Foods play into the Obamacare debate, let me just say a few words about this wonderful company. Back in 1980, when Whole Foods started, if anyone had asked the question, "Does the world really need another chain of supermarkets?" the answer would certainly have been "no." But from a single store in Austin, Texas, Whole Foods now has more than 280 stores in the United States, Canada and the United Kingdom.
They've done it by catching the new wave of the way people want to eat and shop now. They want all the amenities of a supermarket -- variety, low prices, large inventories. But they want higher-quality food -- healthier, lighter, organic, in an environment that doesn't blare commercialism and dehumanization.
Whole Foods' stock has pretty much risen and fallen with the market over the last several years. In the recession, the company has had to pare back growth plans, and the widespread belief that consumers are going to have to scrimp and save for a while has led investors to question whether a "high-end" grocery store can thrive.
I think the stock is cheap. The recession is over, and Whole Foods will surely start expanding again. And it's a mistake to think of it as a "high-end" retailer. One of the things I love about it is that its prices are so competitive -- especially adjusted for the higher-quality level, on average. As confidence in the economy and the U.S. consumer comes back, I think Whole Foods could have a nice run.
But back to the matter of Obamacare. Another reason Whole Foods became a success is the way CEO Mackey runs the business. Here, too, Whole Foods caught a new wave. Whole Foods has always had a philosophy of treating its employees as intelligent human beings, empowering them to made decisions not normally delegated to people who might otherwise be seen as unskilled labor, and giving them significant incentives to improve their performance and productivity. Part of his formula for treating employees well has been the company's approach to health-care benefits.
He talked about it in a commentary in the Wall Street Journal last week. Here's the essence of it:
Whole Foods Market pays 100% of the premiums for all our team members for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees' Personal Wellness Accounts to spend as they choose on their own health and wellness.
And then later on:
Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully.
Do you see the essence of what he has done? First, by offering high-deductible insurance, he has returned the whole concept of health insurance back to what it should have been all along -- a safety net against the really bad health catastrophes. Second, by giving employees the funding to pay for their own care when they just get the sniffles, he returns health care to the discipline that all other markets for any other kind of service have to face -- consumers making careful decisions about how to spend their own money.
Mackey went on in his commentary to criticize Obamacare as the very opposite of his own plan's aspirations. It emphasizes low-deductible insurance, and positions health care as a "right," like the right to free speech, rather than as something that people have to earn and make careful decisions about. Government would end up making the decisions -- and that's just a polite way to say "rationing."
If Whole Foods had to switch over to an Obamacare-style approach, its costs of doing business would rise. And his employees would not be pleased, either, because under his enlightened approach to management he's already crafted his company's health benefits to reflect his employees' stated wishes. As he puts it, "Our plan's costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction."
Labor is the largest cost for most companies. Benefits are the fastest-growing component of labor costs. And health-care insurance is the fastest-growing component of benefits. If Obamacare is enacted, labor costs are only going to go higher -- which means that corporate profits will have to go lower, unless companies pass the costs on to consumers.
Any company CEO -- and all the more so, people who run small businesses where labor costs are high and profit margins are already slim -- needs to be concerned about this. But Mackey is coming from another place, as well.
He's pointing out the very good news that corporate profits and providing generous health benefits don't need to be at odds. He's already found the way -- he just needs to keep government from messing it up for him and his workers.
And yet Mackey has been demonized for expressing these views in print. Left-leaning bloggers have tried to organize a boycott of Whole Foods to punish Mackey. One prominent blogger even made the absurd statement that "very few businesses go as far as Whole Foods in marketing their products specifically as part of a quasi-politicized left-wing lifestyle and few CEOs go as far as Mackey in public advocacy of political views that are only tangentially related to his business."
Oh, come on. There's nothing left-wing about eating healthy. And health-care costs and employee satisfaction are certainly not tangential concerns for a corporate CEO. But do you see now why I keep saying that today's political environment is such a threat to business? If a CEO can't reasonably disagree with President Obama and propose his own worthy alternatives, his political opponents retaliate by trying to destroy his company. How come they think that health insurance is a right, but free speech is not?
And I think this has a lot to do with why stocks have rallied 50% from the March lows -- because that threat hasn't materialized as strongly as was initially feared. Think about it. We have a popular president. A Congress strongly dominated by Democrats. And in health care, a popular issue. And yet it seems they can't get it done.
If guys like John Mackey can keep taking the heat, and keep fighting the good fight, maybe this economy and this stock market have a chance after all.
Donald Luskin is chief investment officer of Trend Macrolytics, an economics consulting firm serving institutional investors. You may contact him at email@example.com.
Related earlier story for reference.
I will drive 15 miles to the Whole Foods today, rather than going to my usual supermarket.
Bring your checkbook!
Fresh, organic etc..(WF)should not be stereotyped by Birkenstock, tie-dyed, peace sign loving new age liberals as primary customers.
Production of smaller qualities under these fresh conditions can certainly cost more, "organic" falls under even stricker state regulations $$$ for the "niche" farmer..but you get what you pay for.
Your body is your temple, so, I feel, treat it right on the 'inside'.
My husband has Meniere’s disease, requiring a strict low-sodium, no-nitrite diet. Any slip-ups cause weeks or months of tinnitus and violent vertigo. If Whole Foods weren’t nearby with their amazing variety of “safe” food, we’d have to move to where there was one. We are very grateful to Whole Foods.
You can spend your “Whole Paycheck” there if you want to; the specialty products and gourmet choices abound and tempt. But, you don’t have to at all. Along with the wide variety of food is a wide range of prices.
I’ve about had it with the stupid, one-dimensional hypocritical and fascist Left. If any of them are picketing my Whole Foods when I go there today, they’ll get an earful. Might even get hit over the head with a very large, organic, locally grown cucumber.
News at 10:00.
I don’t have a Whole Foods nearby, but do have Trader Joe’s. It has high quality and good prices on its items. Since it has a lot of unusual items, lots of Birkenstockers shop there. I ran into a very liberal friend there a while back and he asked me what I was doing in that bastion of liberalism. (TJ’s has no merchandise signs remotely related to politics.) I responded “Since when is good food at good prices liberal?”
If you want to support Whole Foods, here are some ideas.
1. Contact your local store manager and express your support. If you’re shopping there, let the Obama lovers who work there know you are concerned with extreme far Left tactics.
2. E mail Whole Foods at wholefoods.com.
3. John Mackey’s e mail address is: firstname.lastname@example.org
4. Leave a message at corporate headquarters: 512 477 5566.
5. Fax them at 512 482 7000.
Lastly, the other great reason for doing things like this is that it feels good! By expressing my opinion, I felt like I was doing something, and was a great antidote for powerlessness.
And anyway I really do love the salad bar there (not arugula though).
I wish I could afford to go there in person to shop, but traveling 2 1/2 hours to my nearest store doesn’t sound like it’ll help my family a whole lot! (no pun intended)...
However, I will definitely write an email of encouragement to the CEO. I think more liberals are honestly waking up a bit to realize that government control does NOT mean freedom for THEM to make THEIR own choices, either!
Good suggestions, thanks.