Is Starbucks Altering Its Health Insurance Stance? (SBUX)

Starbucks Corporation (NASDAQ:SBUX) has announced to its U.S. employees that it will make the company discretionary match to the 401(k) Savings Plan for the 2009 plan year. In December 2008, Starbucks made its 401(k) match discretionary and said it would be based on the company’s performance over the year.  But where there is some confusion is what this means for the company’s long-standing health insurance plan that has allowed it to have a better quality of employees compared with some of the other large food and beverage chains.

The company also said in the press release that it will fund merit increases for eligible employees for fiscal 2010, and that it will continue to provide comprehensive and affordable health care benefits to all eligible partners.

CNBC ran a blurb that Starbucks would be making increases on the costs of its healthcare coverage.  On the CNBC site there is a Reuters story with the note “The company, known for its generous healthcare, also said its employees would be paying slightly more for their health-care coverage as the company’s costs continue to rise.”  Interestingly enough, if you just look at the statement and do not have an internal memo, then there is no promise that it would “continue to provide comprehensive and affordable health care benefits.”  That does not actually say “at no change in price.”

This is potentially a huge issue.  How this pans out in the end is unknown because the healthcare reform being proposed by the White House is now being described as Health Insurance Reform.  By the time the issue comes to pass, it might be a moot point.  But…

If you take the scenario that the world is static, and just assume that the role of healthcare does not end up changing that drastically compared to today, then this has huge implications.  It all depends upon how this “employees will would be paying slightly more” plays out.  The minimum wage recently changed.  If employees pay a few dollars more per month, then it may be of little importance.  But if the company’s version of “slightly more” ends up being substantial to the employees then those employees may choose to start looking for work elsewhere.

No offense to employees of McDonald’s, but if you just transplant the typical McDonald’s worker to Starbucks it won’t be that long before many Starbucks customers start going to rival coffee houses to get their java fix.

Jon C. Ogg
July 27, 2009