We’ve had an active discussion going about how to motivate consumers to make good decisions about their health when managing their health or chronic disease. So when I heard that Safeway has managed to freeze the growth of their healthcare spending over the past four years through the implementation of a corporate wellness program, I couldn’t wait to see how they accomplished this.
Safeway is a large retail grocery chain with roughly 200,000 employees. They are self insured, spending approximately $1 billion per year on healthcare.
As a self insured employer, Safeway had the flexibility to design their own benefits plan and they did so following a set of understandings (I’ll post more specifics from the presentation by Steven Burd, Chairman and CEO of Safeway, at the World Health Care Congress. if I’m able to get his slides).
- 70% of their medical costs are driven by consumer behaviors
- 74% of their costs come from four chronic conditions
- Cardiovascular disease
- Obesity (and obesity is arguably a significant factor in the other three as well)
- The system should be voluntary
- The incentives to make good decisions should be significant
As a result, they’ve designed a system in which a health consumer who doesn’t participate in their wellness plan will pay 50% more than health consumers who are achieving the lowest cost level through the wellness plan. That lowest cost can be reached in two ways – either by passing a series of wellness tests (BMI, non-smoker, blood pressure under control and others) or by achieving proscribed progress on those measures over the course of the year (lowering BMI by 10%, for instance).
There is more to the program, of course, including access to fitness facilities, targeted interventions such as personal trainers and dietary consults for those in greater need, and access to the best in cancer care. At the core of this program, however, are strong financial perks.
What I find interesting about the incentives is that they are based primarily on results rather than activity. I’m certain they’re requiring all program participants to complete an annual risk assessment along with an annual check-up. However, the incentives appear to be driven by the accomplishment of certain health goals. Getting a checkup that identifies hypertension isn’t sufficient – participants need to get their blood pressure under control. Getting a BMI number and a dietary consult doesn’t buy you a price break – you need to show meaningful progress on that figure.
When consumers face life changing diseases, they are more likely to be motivated to get educated and engaged. For those who are at a point where they might prevent a serious disease, years ahead of the presentation of symptoms, motivation is more difficult. Financial incentives can be successful for that purpose.
Which brings us back to the initial claim that caught my notice.
Safeway has been able to go from a 10% annual growth in their cost base to an essentially flat annual investment in healthcare. For a company that runs slim margins and annual profits that are roughly equal to their annual investment in healthcare, that’s a tremendous success.