The new health-insurance policy is a response to traditional values in China, the company said, as children often care for their parents and grandparents in a society that doesn’t have a comprehensive safety net for the elderly.
Starbucks will provide its workers in China with health insurance that extends coverage to their parents, a unique offering by the coffeehouse chain that may be used by more than 10,000 people to treat conditions such as cancer, heart disease and Alzheimer’s.
The new policy is a response to traditional values in China, the company said, as children often care for their parents and grandparents in a society that doesn’t have a comprehensive safety net for the elderly. The plan, covering 30 critical illnesses and some surgeries, will be available starting in June, Executive Chairman Howard Schultz said.
“This is the first time we’ve done anything like this, and the reason for that is that it was clear there was an emotionally driven concern among partners about their ability to take care of their parents,” Schultz said in an interview in Beijing. “I heard firsthand very emotionally driven, tragic stories about what’s taking place with the parents who got sick, and many passed away. ”
The program addresses a critical need for an aging population that’s contending with increasing rates of major diseases, from cancer to heart ailments. It’s also a strategic move to retain employees, many of them recent college graduates in low-skill jobs, and create goodwill toward the company at a time of increasing political tensions between the U.S. and China.
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Domestically, Starbucks has moved to improve employees’ benefits. In 2015, the company said it would offer full tuition for workers to get an online degree from Arizona State University. It’s also loosened its dress code, and offers one free pound of coffee a week — all in an effort to appease and retain talent.
“This insurance move is about recruiting and retaining talent but also about creating an image of Starbucks that is pro-China, pro-Chinese,” said Shaun Rein, managing director of the China Market Research Group in Shanghai. “If there are bilateral tensions and Starbucks doesn’t have good public relations and a good image in China, they become a target for protests.”
The swelling burden to pay for illnesses is stressing China’s government-run health-insurance programs, which provide basic coverage for 95 percent of its 1.4 billion people. Families in China can still face catastrophic medical bills for costly treatments not covered by public insurance, and the government has long sought private companies to fill that gap.
When Starbucks approached the country’s insurers on the plan, the company was often met with surprise, said Belinda Wong, chief executive officer for Starbucks’ China business. There wasn’t such a program in place and one had to be customized for Starbucks, according to the company.
The Starbucks plan complements the existing China Social Medical Insurance Program. Families are given a lump sum upon diagnosis of a covered illness, and the patient will receive subsidies for treatments for as many as three years. The program will cover a “significant percentage of total medical costs,” according to the company.
Parents must be younger than 75 and reside in mainland China to qualify, the company said. Starbucks will pay the full premiums for eligible workers — those who have been employed by the company for at least two years. The company has about 40,000 employees in China, Schultz said.
The plan is a “multimillion-dollar investment” annually, the company said. Starbucks said it was designed by one of China’s biggest insurance companies, though it didn’t name the insurer.
The move is a strategic one for Starbucks as many multinational companies in China are planning how to contain the fallout if President Donald Trump implements policies that affect business ties or trade with that nation. Trump and China President Xi Jinping met last week for the first time in Florida, and the leaders agreed to a “100-day plan” to discuss trade.
Trump previously vowed to close the trade deficit with China, which reached $347 billion last year.
Schultz repeated that China is the most important market for the company ahead. Starbucks generated about 14 percent of last fiscal year’s revenue in Asia, including China, compared with about 6 percent three years earlier, according to data compiled by Bloomberg.
“We are playing a long game,” Schultz said. “Starbucks is here to stay. We believe there’s a very significant opportunity to build long-term growth.”