Presentation to the Citizens Health Care Working Group Salt Lake City, Utah July 22, 2005

1. Transforming the Health Insurance Delivery Business Model – A Labor-Management Initiative to Manage Care and Targeting Quality Presentation to the Citizens Health Care Working Group Salt Lake City, Utah July 22, 2005 Presented by: David S. Blitzstein Director, Negotiated Benefits Department United Food & Commercial Workers International Union

2. Background: Jointly Administered Health Plans in the Retail Food Industry • Sponsor 70 Plans Governed by ERISA • Cover 800,000 Full-Time and Part-Time Employees • Pay an Estimated $4.8 Billion in Annual Plan Benefits • Administered by Equal Number of Labor and Management Representatives • Over 50 years of Experience Delivering Health Insurance Benefits

3. The Current Health Plan Business Model is Flawed • Attempting to Manage Price of Care vs. Actually Managing Care • At Competitive Disadvantage in Price Negotiations with National and Regional Managed Care Organizations and PBMs • Plans are Dependent on Intermediaries, and Are One Step Removed from Health Care Providers • Plans are Not Focused on Health Care Quality and Patient Safety • Plan Participants are Expected to Navigate the Health Care System Without Assistance

4. A Vision of a New Health Plan Delivery Business Model • Directing Care to High Performance, High Quality Providers • Empowering Members and Physicians through Access to Information Technology • Perform Health Risk Profiling that Analyzes the Health of the Plan Population • Identify High Risk or At-Risk Participants • Organize Targeted Interventions (e.g. Wellness, Disease Management, and Case Management) for High Risk and At-Risk Participants • Assist Participants with Personal Health Advocacy Programs • Adopt Plan Designs that Compliment this Model

5. The Economic Foundation for the New Business Model: Correcting Costly Myths About the Health Care System Fact Myth #1 Plan members think providers are infallible and there is little variation in provider quality Infallibility Provider Quality Quality Quality • Complication and mortality rates often vary 200 – 400% • Service fees and charges often vary by 50% Myth #2 Plan members think quality is proportional to cost Fact Data proves quality = cost: Quality Quality Cost Cost Source: UFCW Working Group – Health Plan of the Future

6. The Economic Foundation for the New Business Model: Correcting Costly Myths About the Health Care System Fact Myth #3 Cost Savings can be mined from plan administration and benefit reductions Source: UFCW Working Group – Health Plan of the Future

7. Is the Information Technology to Support Quality Care Decisions Available? • Private Sector Platforms • Health Care Purchasers – Leapfrog Group • Non-Profits: NCQA & JCAHO • Medicare – www.hospitalcompare.hhs.gov

8. Cost Analysis by Quality Ranking Salt Lake City, Utah Area Hospitals Average of All Hospitals $8,480 Top Hospital Cost $6,335 Difference between Top and Average Hospital 25.3% Difference between Top and Most Expensive Hospital 48.3% Source: HealthShare Technology

9. Cost Analysis by Quality Ranking Salt Lake City, Utah Area Hospitals Average of All Hospitals $25,156 Top Hospital Cost $15,851 Difference between Top and Average Hospital 37% Difference between Top and Most Expensive Hospital 53.5% Source: HealthShare Technology

10. Will Plan Participants Accept Direction on Health Care Decisions? Source: HSC Community Tracking Study Household Survey, 2001 and 2003

11. Cost Savings Potential:Medical Delivery Efficiencies Low est. Medium est. High est. “shallow end” Source: Mercer – Business Roundtable Study

12. How Federal and State Governments Can Support A Quality-Driven Health Insurance Business Model • States Require the Collective and Dissemination Health Provider Outcomes Data • Congress Adopts the Recommendations of the HHS Health Information Technology Leadership Panel Report Issued 5/11/05. • Congress Legislates the 21st Century Health Information Act (H.R. 2234) introduced by Patrick J. Kennedy and Tim Murphy • Congress Should Legislate Price Transparency Requirements for Hospitals, Physicians, Drug Manufactures,and Pharmacy Benefit Mangers