The Pursuit of Coverage
and
Quality Health Care
Presented by
Lynn Zehnder
Director, Benefits Strategy
Sears, Roebuck and Co.
June, 2004
Employer – Based Health Care
Initiatives

Affordable Solutions Coalition
Sears 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 Purchasing
Sears 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
1
Why Do We Care?
The Shark’s Jaws Open
16.0%
13.9%
14.0%
12.9%
12.0%
12.0%
10.9%
10.0%
8.5%
8.2%
8.0%
6.0%
5.3%
4.0%
2.0%
0.8%
0.0%
1988
1993
1996
1999
2000
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.
2001
2002
2003
Health Insurance Premiums
Medical CPI
Overall Inflation
Workers' Earnings
2
Why Do We Care?
Another Year of Double Digit Health Care Cost
Increases
20%
18.6%
16.7%
17.1%
14.7%
15%
13.0%
12.1%
11.2%
10.1%
8.0%
7.3%
6.9%
8.1%
PROJECTED
10%
10.1%
6.1%
5%
2.1% 2.5%
-1.1%
0.2%
0%
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
19
00
20
01
20
02
20
03
20
04
20
-5%
3
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
4
Care Focused Purchasing
Care Focused Purchasing
Concept, Purpose, and Participation



Concept:

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
Purpose:

Speed up underlying marketplace trends

Yield significant reductions in cost trend and improvements in
quality and patient safety
Current participation:

28 national employers

Collectively represent more than 2 million enrolled health plan
members
6
Participating CFP Employers

3M Company

The McGraw-Hill Companies

Adecco

Morgan Stanley

Analog Devices, Inc.

The Pepsi Bottling Group, Inc.

Assurant (formerly Fortis, Inc.)

PepsiCo Inc.

BellSouth Corporation


The Boeing Company
The Procter & Gamble
Company

Capital One Financial Corporation

Sears, Roebuck & Co.

Corning Incorporated

Sprint Corporation

Edward Jones


Hannaford Bros. Co.
Texas Instruments
Incorporated

J.C. Penney Company, Inc.

VNU, Inc.

Lowe’s Companies, Inc.

Weyerhaeuser Company
Marsh & McLennan Companies,
Inc

WPP Group USA, Inc.

Xerox Corporation

(plus three additional
employers that cannot be
7
Activating the Vision


Governance Structure addresses:

Governance and leadership

CFP Charter

Guiding Principles

Framework for Data Stewardship

Process for member input and decision-making
Technical Streams:

Performance, Cost, and Quality Measures

Data Disclosure and Management

Program Design, Pricing, and Management

Public Policy

Communications

Data Stewardship and Management

Outreach to Other Initiatives
8
CFP Data Management
Roles
CFP Employers*
CFP Governance Stream
Data Steward
Key Criteria:
 Independent
 Not-for-profit
 Confidence of carriers,
employers, and other
parties
 Credibility
Data Aggregator
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
9
CFP Data Management
Process Flow
Data Steward
Apply all measures for
each SA market area
CFP Employer selfinsured data
convert into CFP-defined
data layout
CFP Carrier Book-of-Business
data
CFP Universal
Data Warehouse
Deliver all
indicated
assets to all
CFP
stakeholders
• Apply Provider-linkage
methodology
Medicare and other
data as required
10
Activating the Vision
Integrating CFP with Other Initiatives
Other Employer Quality
Initiatives
 Disclosure Project
 Leapfrog
 Bridges to Excellence
 V8
 Other
Regional/National
Employer Healthcare Groups
 NBGH
 PBGH
 MWBGH
 BHCAG
 Other
 Central Florida
Healthcare Coalition
 Gateway Purchasers
for Health
Care Focused
Purchasing
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
11
Activating the Vision
Technical Stream Objectives

Measures: Develop a standardized set of quality and efficiency measures
that will be used to create scorecards for physician and hospital
performance.

Data: 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.

Design: 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 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.

Communications: 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,
12
Affordable Solutions
Affordable 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
14
Affordable – 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
15
Affordable Solutions – Coverage
Options
Level VII
Level VI
Level V
Level IV
Level III
Level II
Level I
*HSA opportunity
Moderate Deductible and OOP Plan
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 outpatient
service benefit
Hospital indemnity
Critical illness
payments
Discounted
network
Modified Guarantee Issue (e.g.
Health Risk Appraisal, mandatory
disease management, short-form
underwriting)
Guarantee Issue
16
Participating Companies
An 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
17
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
18
Why Do We Care?
19