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Health as a Strategy

Health as a Strategy. October 26, 2012. $41 billion in sales 180,000+ employees 1,600+ stores in operation 30+ manufacturing plants 18 distribution centers. 2-3% operating margins Distributed workforce with operations in 22 states & D.C.

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Health as a Strategy

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  1. Health as a Strategy October 26, 2012

  2. $41 billion in sales 180,000+ employees 1,600+ stores in operation 30+ manufacturing plants 18 distribution centers 2-3% operating margins Distributed workforce with operations in 22 states & D.C. Extraordinary educational and work process diversity Non-union employees in all operations covered by Safeway’s plan Safeway Stats Operating Implications Safeway is the 2nd largest grocery chain in North America

  3. In 2005, Safeway’s benefits expense exceeded pre-tax profit • Aging Population • Rising Costs • No clear focus (yet) on improving employee health • Healthcare growing at 2-3 x sales Health Benefit vs. Income (Indexed) Underlying Trends % Conclusion: Business as usual would compromise viability

  4. 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

  5. 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

  6. We made improving employee health a core business strategy – with dramatic results • Transparency tools / consumer choice • Shopping incentives in plan design • Behaviors become healthcare currency • Surround sound support of health & fitness Annual Healthcare Cost Growth*2005-2011 Safeway HealthcareProgram Innovations Cumulative Value = $315M *Per-employee all-inclusive costs: Employer contribution + Employee premium + Employee out-of-pocket costs

  7. Safeway’s Influence on Lifestyle Employees and Spouses Percent of Participants Passing in 2011 who did not Pass in 2008

  8. Strong BMI Improvement Change by at Least One BMI Category 2008-2011 NM 32% 17% 32% 14% 27% 13% 18% Total at Risk 5,432 55% 40% 30% 20% 10% 0 10% 20% 30% 40% Improved > 1 BMI Gr Slipped > 1 BMI Gr *Same Healthy Measures participants (9,772) for all 4 years

  9. Member Blood Pressure Systolic / Diastolic

  10. Member Median Cholesterol* All Members Members not Passing in 2009 188 184 183 2009 2010 2011 2009 2010 2011 Standards: (1) Safeway Pass: 220 (2) National Ideal: 200 * Changes are statistically significant

  11. We accomplished these results by re-engineering our health benefit • Executive Leadership & Commitment • Embedded in Local Management Leadership • Local Health Programing • Condition Support • Pricing Tools • Market-Based Plan • Targeted Pricing • Rewards for Healthy Behavior Education& Support Plan Design Safeway Associates • Local Food Offering • POS Calorie Labels • Fitness Access • Health Awareness • Workplace Design • Engagement and Rewards • Peer & Social Programs Work Environment Employee Engagement

  12. 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 self-development

  13. Leadership plays crucial roles … Management Roles Structure • Building program awareness and support • Involvement defines high-priority initiatives • Communication implies permission and support • Maintain engagement • Cheer for better performance than peers • Model Behavior • Adhere to voluntary commitment Corporate Division District Store

  14. … supported by a comprehensive and diverse communication program

  15. These roles are designed into our programs Individual Participant activity can be aggregated to the division/unit level.

  16. Weekly report-outs maintain continuity TotalRetail: 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

  17. 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) The organizational structure also plays a key role in our promotional efforts 17

  18. Multi-tiered financial incentives to encourage employees across multiple dimensions • Multi-level incentives to reward program participation • Individual rewards for program completion • Team rewards for group participation Engagement • Tiered rewards/recognition for levels improvements (e.g. 5%, 10%) • Encouraging reasonable goal setting Improvement • Team leaders and local champion rewarded, as well • Focus on keeping enrolled employees engaged Support

  19. Blood Pressure BMI Cholesterol Hemoglobin Tobacco Free 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:

  20. Jumpstart Engagement program designed to be social & support participants • Team structure supports weekly check-ins and encouragement • Encourages local competitions • Deli vs. Bakery • Store vs. Store • Enables employees to encourage other employees Local Champions Team Captain Team Captain Team Members

  21. Jumpstart Gateway Portal Front-end portal allows for customized messaging and steerage to resources. Closed/Private Social Network allows for peer-to-peer interaction, challenges, motivation, etc.

  22. 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

  23. Jumpstart – Member Dashboard

  24. Key Factors of Safeway’s Success • Health as a Strategy = Leadership Commitment • Holistic Program • Multi-point support and encouragement • Aligned incentives • Employee accountability Annual Healthcare Cost Growth*2005-2011 Cumulative Value = $315M *Per-employee all-inclusive costs: Employer contribution + Employee premium + Employee out-of-pocket costs

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