TOP CHAINS DIVIDED ON HEALTH CARE

JOANNA RAMEY Additional reporting: JOYCE BARRETT

WASHINGTON (FNS) -- As members of Congress rush to decide what shape health care reform will take, supermarket industry officials are at their doorstep.

But unlike their stance on other issues, supermarket chains are split into two camps. They are taking opposite sides in the battle over whether employers should be mandated to help pay their employees' health care premiums.

The battle over health care continued to rage here on Capitol Hill last week. The Senate expects to begin debating health care this month, and Democratic leaders in both the House and Senate vow they will each produce a version of a health care bill before Congress adjourns in mid-August for the month.

While many industries have not reached a consensus on the health care issue, the supermarket industry divide is particularly striking, especially over the employer-mandate aspect of health care reform.

Even the nation's two largest chains -- Kroger Co., Cincinnati, and American Stores, Salt Lake City -- disagree over the employer mandate issue. Kroger opposes employer mandates, while American favors a system in which all businesses would be required to pay a share of employee health care costs.

Under the initial Clinton administration health care proposal, the employers' share would be 80%.

"It's fair to say, over the next month to two months, you will see a flurry of activity, not just from

the supermarket industry, but from all employers who have a stake in this," Jack Partridge, a group vice president at Kroger, told SN in an interview. Kroger employs 190,000 workers.

Overall, about 3.2 million people are employed in the nation's supermarkets.

In addition to American, chains such as A&P, Montvale, N.J.; Safeway, Oakland, Calif.; Ralphs Grocery Co., Compton, Calif.; Giant Food, Landover, Md.; Vons Cos., Arcadia, Calif., and Pathmark Stores, Woodbridge, N.J., favor some type of employer mandate.

Joining Kroger among the supermarkets opposing employer mandates are: Winn-Dixie Stores, Jacksonville, Fla.; Albertson's, Boise, Idaho; Publix Super Markets, Lakeland, Fla.; Food Lion, Salisbury, N.C., and owner-operators of some 50,000 independent grocery stores. The Food Marketing Institute, an industry trade group based here, estimated that 90% of the supermarket industry opposes employer mandates.

"I don't think there is any industry that is totally together on this," Partridge said. "It's an issue that impacts different ways on different companies. It was inevitable that we wouldn't necessarily sing out of the same hymn book on this one."

FMI, the National Grocers Association, Reston, Va., and the National-American Wholesale Grocers' Association, Falls Church, Va., steadfastly oppose the employer mandates. NGA and NAWGA also are industry trade groups.

"We feel they can achieve useful reforms without a mandate," said George Green, vice president and assistant general counsel at FMI. "There are a lot of things that can be done we support strongly, like malpractice reform, electronic billing, eliminating pre-existing conditions, portability of coverage and certainly purchasing groups on a voluntary basis."

Tom Zaucha, president of NGA, wrote in a recent letter to members of the Senate Finance Committee: "The solution to the health care problem will not be found by reinventing the wheel through legislation that imposes employer mandates, including mandatory premium payments, alliance membership or payroll taxes."

Among the supermarket executives in the promandate camp is Steve Burd, who has been chief executive officer of Safeway for just over a year.

Burd, at a recent Capitol Hill news conference, said if a funding mechanism tied to employer contributions is not part of the final health care package, Safeway would have to reduce health coverage for employees to remain competitive. He cited competitors such as Food Lion and Wal-Mart Stores, Bentonville, Ark., and Kmart Corp., Troy, Mich., as competitors that don't insure the majority of their workers.

"I'll have to level the playing field," Burd told reporters. "I will have to do what is right for my business. That's not a choice we want to make, but it's a choice I will have to make as a responsible CEO."

Burd's message was repeated in a letter to House Majority Leader Richard Gephardt, D-Mo., and Senate Majority Leader George Mitchell, D-Maine. The letter was signed by retail executives from Safeway; A&P; Food 4 Less, Claremont, Calif.; Giant Food and Ralphs, as well as executives of manufacturers H.J. Heinz, Pittsburgh; Sara Lee Corp., Chicago; Keebler, Elmhurst, Ill., and International Multifoods Corp., Minneapolis.

The Senate is expected to take the first, tough votes on employer mandates. If the contentious proposal that requires employers to pay the largest share of health care premiums survives there, it will have added momentum in the House.

What compromise will be struck on the Hill is difficult to tell. The Democratic leadership, striking out on its own to try to break the logjam of bills that have yet to gain consensus, has told President Clinton it will write its own compromise legislation.

Retailers from every sector are among the businesses most concerned with the issue of employer mandates, given their large work forces and dependence on part-time help.

Those supporting mandates see the requirement as the only way to even out competition between those who now pay between 70% and 100% of employee health care and those who don't. Part of this argument, which has been part of the administration's health care mantra, is that businesses without health care shift the cost and responsibility for it to businesses providing the benefit.

The threatened loss of jobs due to increased costs brought on by mandates is the battle cry being carried to the Hill by opponents of mandates.

Just like the promandate group, the opposition has been fanning out across Capitol Hill to lobby legislators. In late June, 300 retail and wholesale executive NGA members took their anti-mandate message to lawmakers.

Kroger executives, too, have been making the rounds.

Although Kroger, much like Safeway and some other union chains, already pays between 70% and 100% of its workers' health insurance premiums, company officials said they don't believe required employer contributions will even out competition.

Partridge of Kroger acknowledged that health care costs tied to union contracts "create a disadvantage" for the company against nonunion competition. But, he said, requiring employer mandates won't make supermarkets now shouldering the health care burden more competitive.

Other cost-saving measures, such as ridding the current health care system of inefficiencies, would make better public policy, he said.

"Every time you look at government for solutions, costs are bound to increase," he said. Additionally, Partridge said, it is "inevitable" that requiring employers to provide health care benefits to all employees would slow the creation of jobs.

Officials at A&P, which employs 92,000 people, said requiring across-the-board employer mandates is the most efficient means to help pay for health care. The alternative would be tax increases of some sort, said Michael Rourke, an A&P senior vice president. "We have to have some kind of comprehensive program to get this under control," Rourke said of the escalating health care costs. Rourke said as health care costs have increased over the past 20 years -- they are now estimated at 15% of disposable consumer income -- the average expenditure on food has declined to 8% of disposable income from 15%.

"Building on our current system of employer-supplied health care is the best way to do it," he said. "We have to do it in a fair and equitable manner."

The fate of employer contributions appears far from settled.