Today the Wall Street Journal covers the innovative private-sector health care program which Safeway offers to its employees. It sounds like a model for how market incentives can encourage workers to live healthier and more active lifestyles:

Safeway’s plan capitalizes on two key insights gained in 2005. The first is that 70% of all health-care costs are the direct result of behavior. The second insight, which is well understood by the providers of health care, is that 74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity). Furthermore, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.

As much as we would like to take credit for being a health-care innovator, Safeway has done nothing more than borrow from the well-tested automobile insurance model. For decades, driving behavior has been correlated with accident risk and has therefore translated into premium differences among drivers. Stated somewhat differently, the auto-insurance industry has long recognized the role of personal responsibility. As a result, bad behaviors (like speeding, tickets for failure to follow the rules of the road, and frequency of accidents) are considered when establishing insurance premiums. Bad driver premiums are not subsidized by the good driver premiums.

As with most employers, Safeway’s employees pay a portion of their own health care through premiums, co-pays and deductibles. The big difference between Safeway and most employers is that we have pronounced differences in premiums that reflect each covered member’s behaviors. Our 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…

At Safeway, we are building a culture of health and fitness. The numbers speak for themselves. Our obesity and smoking rates are roughly 70% of the national average and our health-care costs for four years have been held constant. When surveyed, 78% of our employees rated our plan good, very good or excellent. In addition, 76% asked for more financial incentives to reward healthy behaviors. We have heard from dozens of employees who lost weight, lowered their blood-pressure and cholesterol levels, and are enjoying better health because of this program. Many discovered for the first time that they have high blood pressure, and others have been told by their doctor that they have added years to their life.

Today, we are constrained by current laws from increasing these incentives. We reward plan members $312 per year for not using tobacco, yet the annual cost of insuring a tobacco user is $1,400. Reform legislation needs to raise the federal legal limits so that incentives can better match the true incremental benefit of not engaging in these unhealthy behaviors. If these limits are appropriately increased, I am confident Safeway’s per capita health-care costs will decline for at least another five years as our work force becomes healthier.

This is precisely the direction we should be headed in health care: one that gives individuals greater control over their costs and their plans. A central failure of our existing system – one that would be exacerbated by socializing health care – is that it divorces individuals from the costs of their health care. It puts employers and taxpayers on the hook for much of the cost, and gives individuals no incentive to make rational cost-benefit analyses about their care.

Programs like Safeway’s provide valuable ammunition for conservatives. While liberals scream that we must do something, we have an example of what works: a commonsense system of incentives and penalties – which still doesn’t impose onerous costs on workers.

No less an authority than Barack Obama has praised Safeway for its innovative approach:

Building a health care system that promotes prevention rather than just managing diseases will require all of us to do our part. It will take doctors telling us what risk factors we should avoid and what preventive measures we should pursue. And it will take employers following the example of places like Safeway that is rewarding workers for taking better care of their health while reducing health care costs in the process. If you’re one of the three quarters of Safeway workers enrolled in their “Healthy Measures” program, you can get screened for problems like high cholesterol or high blood pressure. And if you score well, you can pay lower premiums. It’s a program that has helped Safeway cut health care spending by 13% and workers save over 20% on their premiums. And we are open to doing more to help employers adopt and expand programs like this one.

If Obama really believes we ought to do more to expand programs like this one, he needs to have a talk with his friends in Congress. They are planning to make the Safeway program illegal.

Barack Obama will try to get away with offering kind words about this program while allowing Congressional Democrats to kill it. When he signs legislation that sets us on the road to a single-payer federal system, he’ll offer some lame statement about how he disagrees with that part of the bill.

That can’t be allowed to happen.