Whole Foods-Style Health Care

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).

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.