Health as a Strategy
October 26, 2012
Safeway is the 2nd largest grocery chain in
North America
Safeway Stats
Operating Implications
• $41 billion in sales
• 2-3% operating margins
• 180,000+ employees
• Distributed workforce with
• 1,600+ stores in operation
• 30+ manufacturing plants
• 18 distribution centers
operations in 22 states & D.C.
• Extraordinary educational and
work process diversity
• Non-union employees in all
operations covered by
Safeway’s plan
2
In 2005, Safeway’s benefits expense
exceeded pre-tax profit
Health Benefit vs. Income
(Indexed)
%
100
106
Underlying Trends
• Aging Population
• Rising Costs
• No clear focus (yet) on
improving employee health
• Healthcare growing at
2-3 x sales
Profit Before Tax
Healthcare
Conclusion: Business as usual
would compromise viability
3
Several causes were driving escalating
healthcare costs
• Plan design lacked incentives to encourage healthy
behavior
• Providers of healthcare are less involved and not
incented to encourage healthy actions
• Employee’s contributions and out-of-pocket costs did
not reward their health improvement efforts
• Cost and quality information was largely absent, so
employees could not easily shop for care
4
Our solution was a holistic program,
focused on health and fitness
• Encourage employees to think of all healthcare
spending as their money
• Motivate employees to help them make healthier
choices and actions
• Drive wellness and disease program utilization
• Support employees with education and environmental
reinforcement
5
We made improving employee health a core
business strategy – with dramatic results
Annual Healthcare Cost Growth*
2005-2011
Safeway Healthcare
Program Innovations
• Transparency tools /
8.1%
consumer choice
Cumulative
Value =
$315M
2.2%
• Shopping incentives in plan
design
• Behaviors become healthcare
currency
• Surround sound support of
USA
Safeway
health & fitness
*Per-employee all-inclusive costs: Employer contribution + Employee premium + Employee out-of-pocket costs
6
Safeway’s Influence on Lifestyle
Employees and Spouses
Percent of Participants Passing in 2011 who did not Pass in 2008
7
Strong BMI Improvement
Change by at Least One BMI Category
Population* in 2008
#
2008-2011
%
NM
Obese III
276
3%
Obese II
497
5%
Obese I
1,293
13%
Overweight
3,366
34%
17%
5,432
32%
14%
13%
Total at Risk
32%
27%
18%
55%
40% 30% 20% 10% 0 10% 20% 30% 40%
Slipped > 1 BMI Gr
Improved > 1 BMI Gr
*Same Healthy Measures participants (9,772) for all 4 years
8
Member Blood Pressure
Systolic / Diastolic
Measurem
ent Year
Average
Median
2008
126 / 79
126 / 79
2009
123 / 78
122 / 79
2010
120 / 76
120 / 77
2011
121 / 77
120 / 78
9
Member Median Cholesterol*
All Members
Members not Passing in 2009
188
184
183
2009
2010
2011
2009
Standards: (1) Safeway Pass: 220
2010
2011
(2) National Ideal: 200
* Changes are statistically significant
10
We accomplished these results by reengineering our health benefit
• Executive Leadership & Commitment
• Embedded in Local Management
Leadership
• Market-Based Plan
Plan
• Targeted Pricing
Design
• Rewards for
Healthy Behavior
•
•
•
•
•
Local Food Offering
POS Calorie Labels
Fitness Access
Health Awareness
Workplace Design
Safeway
Associates
Work
Environment
Education
& Support
Employee
Engagement
• Local Health
Programing
• Condition
Support
• Pricing Tools
• Engagement and
Rewards
• Peer & Social
Programs
11
We focused on four motivating factors for
positive employee change and engagement
Leadership: Organizational leadership, management
encouragement and permission
Financial: Rewards for positive performance
Social: Peer encouragement to pursue healthy
behaviors
Intrinsic: Personal motivation, interest, and selfdevelopment
12
Leadership plays crucial roles …
Management Roles
• Building program awareness
and support
Structure
Corporate
– Involvement defines highpriority initiatives
– Communication implies
permission and support
Division
• Maintain engagement
– Cheer for better
performance than peers
District
– Model Behavior
• Adhere to voluntary
Store
commitment
13
… supported by a comprehensive and
diverse communication program
14
These roles are designed into our programs
Individual
Participant
activity can be
aggregated to
the division/unit
level.
15
Weekly report-outs maintain continuity
District
Store
Activity Hours
per Participant
District
Store
Activity Hours
per Participant
D2
2561
111.6
C3
2471
80.6
D1
3582
106.8
D4
1786
73.0
D4
2587
106.5
D4
3614
70.9
C1
1066
104.1
D2
1784
70.2
D4
3622
86.9
D1
2578
68.3
Total Retail: 26.8 Hours per Participant
Backstage: 49.2 Hours per Participant
Total Texas: 30.0 Hours per Participant
NorCal D7: 40.1 Hours per Participant
16
The organizational structure also plays a
key role in our promotional efforts
Company
($$$ to charity of choice)
Division/Region
(JS Challenge winner
and end-of-year winner)
Employee
(All points contribute
to employee account,
Division and
end-of-year goal)
17
17
Multi-tiered financial incentives to encourage
employees across multiple dimensions
• Multi-level incentives to reward program
participation
Engagement
• Individual rewards for program completion
• Team rewards for group participation
Improvement
• Tiered rewards/recognition for levels improvements
(e.g. 5%, 10%)
• Encouraging reasonable goal setting
• Team leaders and local champion rewarded, as well
Support
• Focus on keeping enrolled employees engaged
18
Underpinned by our behavioral rewards
program
• A voluntary program, encouraging employees to know
their risks
• The program rewards employees who achieve healthy
results and creates incentives for employees to become
healthier
• Paid via premium discounts or health investment accounts
• Five incentive and retroactive rebate opportunities:
BMI
Blood
Pressure
Cholesterol
Hemoglobin
Tobacco
Free
19
Jumpstart Engagement program designed
to be social & support participants
Local Champions
Team Captain
Team Captain
• Team structure supports
weekly check-ins and
encouragement
• Encourages local
competitions
– Deli vs. Bakery
– Store vs. Store
Team
Members
• Enables employees to
encourage other employees
20
Jumpstart Gateway Portal
Closed/Private
Social Network
allows for peerto-peer
interaction,
challenges,
motivation, etc.
Front-end portal
allows for
customized
messaging and
steerage to
resources.
21
Appealed to individual engagement on
many levels
 Focus on making programs fun and accessible
 Developed a better social fabric in the work
environment
 Offered variety of ways to improve and learn about
health to increase personal relevance
 Platform for employee input
 Selected charitable/ philanthropic contributions
22
Jumpstart – Member Dashboard
23
Key Factors of Safeway’s Success
• Health as a Strategy =
Leadership Commitment
Annual Healthcare Cost Growth*
2005-2011
• Holistic Program
• Multi-point support and
8.1%
encouragement
Cumulative
Value =
$315M
• Aligned incentives
2.2%
• Employee accountability
USA
Safeway
*Per-employee all-inclusive costs: Employer contribution + Employee premium + Employee out-of-pocket costs
24