Health Care Transformation An Employers’ Perspective

1. Health Care TransformationAn Employers’ Perspective Bipartisan Policy Center April 24, 2008 Sally Welborn Senior Vice President – Corporate Benefits Wells Fargo & Company

2. About Wells Fargo • 165,000 active Team Members • 15,000 retired Team Members with health care through Wells Fargo • Over 300,000 individuals covered by health plans provided by Wells Fargo • Over $1 Billion in health care spend annually • Located in all 50 states (and some international) • 156 years old and the result of hundreds of mergers and acquisitions

3. The Health Care Problem • Quality • Safety • Cost • Coverage Decline/Cost Shifting

4. The Health Care Problem • Unexplainable Practice Variation by Physicians • Overuse, Underuse and Misuse • Patients get recommended care only about half the time • Americans less and less healthy • Chronic Conditions are on the increase • Lack of exercise, Unhealthy eating habits • Americans dying from unsafe health care • Estimate 98,000 people die annually due to medical errors • Health Care System wasteful and inefficient • No incentives and/or misaligned incentives for patient, provider and health plan to “do the right thing” • Little information on cost/quality available to enable patient or engage providers • Uninsured (or underinsured) population large and growing • Diverse Population with Diverse Needs BOTTOM LINE: UNSUSTAINABLE HEALTH CARE COST INCREASES FOR EMPLOYERS AND EMPLOYEES

5. Premium and Trend Context • Health insurance premium increases have consistently exceeded the CPI and worker earnings • Premium increases are “eating” all potential wage increases for workers and their retirement savings • Key drivers of premium increases: • Absence of market forces rewarding better quality and more efficient care (fee-for-service versus “whole person”) • Impact of new technologies, health labor shortages, aging population and poor population health • Decreased plan competition • Provider monopolistic practices • Cost-shifting from under funding of Medicare, Medicaid and the uninsured

6. Market Realities and Impact of Cost Increases • Some Employers Dropping Coverage • 4% fewer Americans with Commercial insurance • Large decrease in coverage for the middle classes • Over one-third of the uninsured nationwide earn more than 200% of the federal poverty level • Many Employers Dramatically Changing Offerings • Increasing share of costs to employees (contributions, rising point-of-service payments, larger deductibles) • Thinner plan designs • Threat to Many Consumers Health Status and Financial Security • Risk of consumers avoiding care and preventive services • Major driver of personal bankruptcies

7. A Politically Unstable TrendMiddle Income Workers are Losing Insurance Most Quickly(Uninsurance kills ~5,000 annually; rising ~450 annually) Adapted from “A Need to Transform the U.S. Health Care System: Improving Access, Quality, and Efficiency,” compiled by A. Gauthier and M. Serber, The Commonwealth Fund, October 2005. * In 1999, CPS added a follow-up verification question for health coverage. Source: Analysis of the March 1988–2004 Current Population Surveys by Danielle Ferry, Columbia University, for The Commonwealth Fund.

8. Quality Shortfalls: Getting it Right 50% of the Time • Adults receive about half • of recommended care 54.9% = Overall care 54.9% = Preventive care 53.5% = Acute care 56.1% = Chronic care Not Getting the Right Care at the Right Time

9. BUT…Truly Excellent Care and Rapid Improvements are Possible Improvement in Screening and Health Status for Californians with Diabetes: Results of Measurement, QI, Reporting and Pay-for-Performance

10. What If We Don’t Do Anything??? • US businesses less competitive globally • Wage increases depressed • Employment opportunities dampened • More and more uninsured Americans and therefore, more cost shifting to employers ?????

11. Wells Fargo …. Aspirational Goals • For Team Members(Employees) • Coverage to assure access to right care at right time • Information to be a good consumer  (price, quality, access etc) • Improvement in trend of future employee premium increases • Incentives to get right treatment (and get back to work) • Better quality of life • Affordable health care and health insurance • Respectful of diverse needs and desires • For Providers • Keen appreciation and pressure resulting from their patients having a stake in costs and outcome • Incentives to provide evidence-based medicine • Rewarding better performing providers • Better outcomes and greater efficiency • For Wells Fargo • Endorsement of philosophy that health coverage is integral part of offering to ensure our team members’ financial success and part of our strategy to promote productive and engaged work force • Moderation in the rate of health cost increases • Improved team member wellness and productivity • Reduction in number of uninsured in U.S. Ideal State: Sustainable Health Care Trend, Better Quality Care

12. What catalyst will begin to move the market closer to Ideal Health Care State? The Consumer/Patient will !! • Transparency • When patients have information to support asking their doctors about treatment costs and differences in quality, the market will finally respond in developing national standards of cost and quality reporting • Incentives to seek right care at right time • When consumers have a reason to ask about the cost of treatment choices they will change the way they “purchase” health care • Cost and Quality Tradeoffs • When providers understand the patient is “at risk” for the differences in cost and quality, efficiency will improve If consumer/patients are engaged and making better choices, and providers are under pressure from patients to provide more effective/efficient care, potential impact to health care trend can be 5 to 40%. (Arnie Milstein)

13. Wells Fargo Health Plan Offerings • PPO offered in all states with small copay in-network • Two consumer directed health plans offered in all states • Front end Health Reimbursement Account to pay for first health care expenses followed by deductible depending on plan and coverage level, followed by traditional PPO with limit on out of pocket expenses • Incentives for chronic condition management • Prevention paid at 100%, no deductible; mental health provided in additional stand alone benefit • Health Savings Account/High Deductible Plan offered in all states • Recently offered to support members who desire HSA • High quality HMO’s offered where available

14. Major Levers of Change for Employers • Plan selection and holding plans accountable for assuring that right care is provided at the right time • Rational plan selection approach for employees • Benefit design • Promoting system change with stakeholders and policy makers

15. Wells Fargo Plan Selectionand Accountability Considerations • Selection of “Best-in-Class” Health Plans • Strong network with strong network management • Outstanding health management programs and vision • Effective integration of DM/health management • Clear vision regarding consumer activation and excellent consumer tools • Demonstrate flawless administrative capabilities • Holding Health Plans Accountable • Claims Target and Network Discount Guarantees • Savings Guarantees for Chronic Condition Management and Preference Sensitive Care Coaching • Measure compliance around Evidence Based Medicine and standards of care • Member service delivery platform effectiveness • Guarantee Value of Next Generation Networks (i.e. High Performance Networks)

16. Standard Contracting Assessment Areas • Core Plan Administration • Plan Collaboration • HIT, PPO Administration • Value-Based Plan Design • Reducing Disparities & Cultural Compentence • Consumer Engagement • Provider Measurement & Rewards • Pharmaceutical Management • Prevention & Health Promotion • Chronic Disease Management • Diabetes • Cardiovascular disease • Low back pain • Total population management • Behavioral Health • Provider Measurement & Rewards: • Provider Performance Transparency • Practitioners and/or Groups • Hospitals • Shared Decision Making Support • Electronic Personal Health Record • Price Transparency • Pharmaceutical Management • CAHPS Ratings • Prevention & Health Promotion: • Worksite Health Promotion • Health Risk Appraisals • Preventive Screening (Cancer/ Immunization) • Tobacco Cessation • Obesity • Maternity Care • Chronic Disease Management: • Member Identification • Targeted/Tailored Messaging • Member Reminders • Inbound/Outbound Calls & Support

17. Plan Selection: Sample for “Core Plan Administration” Elements HMO A HMO B HMO C HMO D HMO E

18. Providing Employees with data to make rational decisions • Member Ranking based on • Premiums • Out of Pocket Costs • Physician Selection • Plan level quality indicators • Plan Features and Services

19. Benefit Design Can Address Many Issues • Respond to diverse employee needs and desires • Wells Fargo offers HMO’s, CDHP and PPO’s • Encourage member behavior • Rx plan designs to encourage best drug for condition at lowest cost • Incent health management • Innovative Program in WF CDHP plan – Rewards for Action • Eliminate real (or perceived) financial barriers to care • Incentives for chronic care management • Foster accessing preventive care with low or no cost coverage

20. CDHP Incentives for Chronic Care Management Rewards For Action Program Diabetes; Asthma; Coronary Artery Disease; Chronic Obstructive Pulmonary Disorder; Coronary Heart Failure; Hypertension

21. Wells Fargo Lessons – We Can Make a Difference, but We Can’t Solve the Problem Alone Lessons: • Thoughtful plan selection and design leads to cost reductions and savings • With tools and incentives, consumers will be better engaged in their care • Plan designs and engaging consumer can lead to better outcomes BUT….Costs are rising because we have VERY little impact over the broader system failures

22. Other Systemic Changes Must Also Take Place • Improved Health Information Technology (EMR) • Elimination of waste in the system due to archaic systems and processes • Creates the forum to provide transparency to support other initiatives • Reduction in provider errors and inappropriate provider practice patterns • Alignment of provider payment and incentives Wells Fargo has influence in these areas through various initiatives such as PBGH, NBGH, Health Information Technology Leadership Panel, Leapfrog, but… ONE EMPLOYER CANNOT DO IT ALONE AND NATIONAL SOLUTIONS ARE NEEDED!!!

23. Wells Fargo Challenges and National Solutions