The Pursuit of Coverageand

Quality Health Care

The Pursuit of Coverageand

Quality Health Care

Presented byLynn Zehnder

Director, Benefits StrategySears, Roebuck and Co.

June, 2004

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Employer – Based Health Care Initiatives

Employer – Based Health Care Initiatives

Affordable Solutions CoalitionSears has joined forces with more than 50 Fortune 500 Companies to create an easier entry point to a range of health plans for their combined uninsured populations. Individuals will be responsible for paying their own premiums, but the Coalition aims to provide lower cost coverage than is available to an individual

Care Focused PurchasingSears and 28 other large employers are working to provide consumers with quality and efficiency data for individual hospitals and physicians to help them make better decisions when choosing providers

The employer-based system seems inherently more promising than a government alternative -or so our employees tell us

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12.9%

5.3%

8.2%

10.9%

12.0%

8.5%

0.8%

13.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

1988 1993 1996 1999 2000 2001 2002 2003

Health Insurance Premiums Medical CPI Overall Inflation Workers' Earnings

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits; 2003. Dental work by Dr. Milstein.

Note: Data on premium increases reflect the cost of health insurance premiums for a family of four.

Why Do We Care?The Shark’s Jaws Open

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Why Do We Care?Another Year of Double Digit Health Care Cost

Increases

Why Do We Care?Another Year of Double Digit Health Care Cost

Increases

6.9%

18.6%

17.1%

12.1%

10.1%

8.0%

2.1% 2.5%

0.2%

6.1%7.3%

8.1%

11.2%

14.7%

10.1%

13.0%

16.7%

-1.1%

-5%

0%

5%

10%

15%

20%

PR

OJE

CT

ED

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Why Do We Care?Employers Can Gain From Insuring the

Uninsured

Why Do We Care?Employers Can Gain From Insuring the

Uninsured

Reduction of Uncompensated Care Cost Shifting $3B - $16B

Reduction in Turnover $3.8B - $8.6B

Reduction of Absenteeism $1B - 1.2B

Productivity Gains $87B - $126B

Total $95.1B - $151.8B

Source: Employment Policy Foundation Estimates

Care Focused PurchasingCare Focused Purchasing

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Care Focused PurchasingConcept, Purpose, and

Participation

Care Focused PurchasingConcept, Purpose, and

Participation ConceptConcept:

Acting together, employers – can make a market that rewards better physicians, better hospitals, and better treatment options

Standardized information on provider quality and efficiency will create performance sensitive buyers of care

This will result in a more transparent, rational market for health care

PurposePurpose: Speed up underlying marketplace trends

Yield significant reductions in cost trend and improvements in quality and patient safety

Current participationCurrent participation: 28 national employers

Collectively represent more than 2 million enrolled health plan members

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Participating CFP EmployersParticipating CFP Employers

3M Company Adecco Analog Devices, Inc. Assurant (formerly Fortis, Inc.) BellSouth Corporation The Boeing Company Capital One Financial

Corporation Corning Incorporated Edward Jones Hannaford Bros. Co. J.C. Penney Company, Inc. Lowe’s Companies, Inc. Marsh & McLennan Companies,

Inc

The McGraw-Hill Companies Morgan Stanley The Pepsi Bottling Group, Inc. PepsiCo Inc. The Procter & Gamble Company Sears, Roebuck & Co. Sprint Corporation Texas Instruments Incorporated VNU, Inc. Weyerhaeuser Company WPP Group USA, Inc. Xerox Corporation

(plus three additional employers that cannot be named publicly)

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Activating the VisionActivating the Vision

Governance Structure addressesGovernance Structure addresses: Governance and leadership CFP Charter Guiding Principles Framework for Data Stewardship Process for member input and decision-making

Technical StreamsTechnical Streams: Performance, Cost, and Quality Measures Data Disclosure and Management Program Design, Pricing, and Management Public Policy Communications

Data Stewardship and ManagementData Stewardship and Management

Outreach to Other InitiativesOutreach to Other Initiatives

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CFP Data Management Roles

CFP Data Management Roles

Key Candidates: Independent of carriers and

consulting firms Confidence of carriers,

employers, and other parties Experience and scalability Affordability

*Mercer Human Resource Consulting provides operational oversight and project management support

CFP Employers*

Key Criteria: Independent Not-for-profit Confidence of carriers,

employers, and other parties

Credibility

CFP Governance Stream

Data Steward Data Aggregator

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Data StewardData Steward

CFP Data ManagementProcess Flow

CFP Data ManagementProcess Flow

CFP Carrier Book-of-Business data

Medicare and otherdata as required

conv

ert i

nto

CFP

-def

ined

data

layo

ut

CFP UniversalData Warehouse

CFP UniversalData Warehouse

• Apply Provider-linkage methodology

Apply all measures foreach SA market area

Deliver all indicatedassets to all CFPstakeholders

CFP Employer self-insured data

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Activating the VisionIntegrating CFP with Other Initiatives

Activating the VisionIntegrating CFP with Other Initiatives

Care Focused Purchasing

Regional/National Employer Healthcare NBGH PBGH MWBGH BHCAG Other Central Florida Healthcare Coalition Gateway Purchasers for Health

Groups Benefits Related Employer Groups ABC Conference Board Council on EE Benefits ERIC EBRI HR Policy Association Other

Other Quality Organizations National Quality Forum NCQA JCAHO Other

Other Employer Quality Initiatives Disclosure Project Leapfrog Bridges to Excellence V8 Other

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Activating the VisionTechnical Stream Objectives

Activating the VisionTechnical Stream Objectives

MeasuresMeasures: Develop a standardized set of quality and efficiency measures that will be used to create scorecards for physician and hospital performance.

DataData: Create a consumer data repository by combining data from several sources (self-insured employers, carrier book of business, Medicare). The repository will be used to generate standardized provider scorecards.

DesignDesign: Develop an overall program design that integrates the key features of the “End State.” The design will address both the ultimate End State and an interim structure for 2005. Once the program design is established, we will identify and negotiate with suppliers who will align service offerings with CFP principles.

Public PolicyPublic Policy: Create and advance a public policy agenda that supports the vision of the CFP, especially making valid provider performance information more available. A specific objective is liberation of physician identifiers in Medicare data.

CommunicationsCommunications: Develop, deliver, and implement a strategy for communication of CFP vision, actions, and results to key constituents, including a series of concise messages for management, employees, providers, vendors, other employers, and the public/media.

Affordable SolutionsAffordable Solutions

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Affordable Solutions – ObjectiveAffordable Solutions – Objective

Reduce the number of uninsured by providing access to affordable health care for ineligible actives and retirees

Ineligible part-time employees or employees in waiting period

Contract workers

Pre-65 retirees

Terminated employees or those coming off COBRA

Ineligible dependents

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Affordable – Concept OverviewAffordable – Concept Overview

Develop unsubsidized, separately administered health care and benefit options with:

open enrollment

national focus

exclusive contracting

limited first dollar coverage

standardized designs with variations in limited areas

interactive selection tools including provider

lower administration fees

reduced commissions

economics of scale

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Affordable Solutions – Coverage Options

Affordable Solutions – Coverage Options

Discounted network

Moderate Deductible and OOP Plan

Critical illness payments

Catastrophic Coverage* with fewer limitations―Open Network―LT Maximums

Catastrophic Coverage* with significant limitations

―Closed network―Annual/LT maximums

―Mandatory medical management and Center of Excellence

Scheduled hospital and outpatientservice benefit

Modified Guarantee Issue (e.g. Health Risk Appraisal, mandatory disease management, short-form underwriting)

Guarantee Issue

Hospital indemnity

Level VII

Level VI

Level V

Level IV

Level III

Level II

Level I

*HSA opportunity

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Participating CompaniesAn estimated 4,000,000 eligible

Participating CompaniesAn estimated 4,000,000 eligible

ACS Ford Motor Corporation McDonald’s Corporation

Aerojet FPL Group Inc. Motorola, Inc

ALCOA Inc. Gap Inc. Parker Hannifin

Corporation

Allstate Insurance Company General Dynamics

Payless Shoe Source

Anheuser-Busch General Electric Company Prudential Financial

Avon Products, Inc. General Mills Sears, Roebuck and

Company

Caterpillar Inc. The Home Depot Starbucks Corporation

Church Pension Group Honeywell Starwood Hotels and

Resorts

Circuit City Stores, Inc. IBM Corporation SYSCO

Cox Enterprises, Inc. International Paper Target, Inc.

DTE Energy Company Johnson Controls, Inc. Temple-Inland

Eaton Corporation Limited Brands Textron Inc.

EMC Corporation Lockheed Martin Corporation Toys “R” Us, Inc.

Emerson Electric Company Maersk United Parcel Service

The Episcopal Church Manpower Incorporated United Technologies

Federal-Mogul Corporation Marathon Ashland Verizon Communications

First Data Corporation Marriott Verizon Wireless

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Creating a New Health Care Marketplace

Creating a New Health Care Marketplace

Imagine a health care marketplace in which Consumers are free to choose providers, but are sensitive

to cost and quality, and are engaged in their health

Doctors and hospitals compete based on the cost and quality of services and are rewarded for better performance

Purchasers reward plans for their ability to create innovative plan designs that align provider-patient-purchaser incentives and are supported by cutting edge tools, resources and technology

Affordable Solutions and Care Focused Purchasing, while two separate initiatives with distinctly different goals, have the potential to positively impact the current health care delivery model

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Why Do We Care?