1. The Pursuit of Coverage and Quality Health Care Presented by Lynn Zehnder Director, Benefits Strategy Sears, Roebuck and Co. June, 2004

2. 1 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

3. 2 Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits; 2003. D ental work by Dr. Milstein. Note: Data on premium increases reflect the cost of health insurance premiums for a family of four. Why Do We Care? The Shark’s Jaws Open

4. 3 Why Do We Care? Another Year of Double Digit Health Care Cost Increases PROJECTED

5. 4 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

6. Care Focused Purchasing

7. 6 Care Focused Purchasing Concept, Purpose, and Participation Concept 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 Purpose:  Speed up underlying marketplace trends  Yield significant reductions in cost trend and improvements in quality and patient safety Current participation Current participation:  28 national employers  Collectively represent more than 2 million enrolled health plan members

8. 7 Participating CFP Employers 3M Company Adecco Analog Devices, Inc. Assurant (formerly Fortis, Inc.) BellSouth Corporation The Boeing Company Capital One Financial Corporation Corning Incorporated Edward Jones Hannaford Bros. Co. J.C. Penney Company, Inc. Lowe’s Companies, Inc. Marsh & McLennan Companies, Inc The McGraw-Hill Companies Morgan Stanley The Pepsi Bottling Group, Inc. PepsiCo Inc. The Procter & Gamble Company Sears, Roebuck & Co. Sprint Corporation Texas Instruments Incorporated VNU, Inc. Weyerhaeuser Company WPP Group USA, Inc. Xerox Corporation (plus three additional employers that cannot be named publicly)

9. 8 Activating the Vision Governance Structure addresses Governance Structure addresses:  Governance and leadership  CFP Charter  Guiding Principles  Framework for Data Stewardship  Process for member input and decision-making Technical Streams Technical Streams:  Performance, Cost, and Quality Measures  Data Disclosure and Management  Program Design, Pricing, and Management  Public Policy  Communications Data Stewardship and Management Data Stewardship and Management Outreach to Other Initiatives Outreach to Other Initiatives

10. 9 CFP Data Management Roles 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 CFP Employers* Key Criteria: Independent Not-for-profit Confidence of carriers, employers, and other parties Credibility CFP Governance Stream Data StewardData Aggregator

11. 10 Data Steward CFP Data Management Process Flow CFP Carrier Book-of-Business data Medicare and other data as required convert into CFP-defined data layout CFP Universal Data Warehouse CFP Universal Data Warehouse Apply Provider-linkage methodology Apply all measures for each SA market area Deliver all indicated assets to all CFP stakeholders CFP Employer self- insured data

12. 11 Activating the Vision Integrating CFP with Other Initiatives Care Focused Purchasing Regional/National Employer Healthcare NBGH PBGH MWBGH BHCAG Other Central Florida Healthcare Coalition Gateway Purchasers for Health Groups 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 Other Employer Quality Initiatives Disclosure Project Leapfrog Bridges to Excellence V8 Other

13. 12 Activating the Vision Technical Stream Objectives Measures Measures: Develop a standardized set of quality and efficiency measures that will be used to create scorecards for physician and hospital performance. Data 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 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 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 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, providers, vendors, other employers, and the public/media.

14. Affordable Solutions

15. 14 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

16. 15 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

17. 16 Affordable Solutions – Coverage Options Discounted network Moderate Deductible and OOP Plan Critical illness payments 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 Modified Guarantee Issue (e.g. Health Risk Appraisal, mandatory disease management, short-form underwriting) Guarantee Issue Hospital indemnity Level VII Level VI Level V Level IV Level III Level II Level I *HSA opportunity

18. 17 Participating Companies An estimated 4,000,000 eligible ACSFord Motor CorporationMcDonald’s Corporation AerojetFPL Group Inc.Motorola, Inc ALCOA Inc.Gap Inc.Parker Hannifin Corporation Allstate Insurance CompanyGeneral DynamicsPayless Shoe Source Anheuser-BuschGeneral Electric CompanyPrudential Financial Avon Products, Inc.General MillsSears, Roebuck and Company Caterpillar Inc.The Home DepotStarbucks Corporation Church Pension GroupHoneywellStarwood Hotels and Resorts Circuit City Stores, Inc.IBM CorporationSYSCO Cox Enterprises, Inc.International PaperTarget, Inc. DTE Energy CompanyJohnson Controls, Inc.Temple-Inland Eaton CorporationLimited BrandsTextron Inc. EMC CorporationLockheed Martin CorporationToys “R” Us, Inc. Emerson Electric CompanyMaerskUnited Parcel Service The Episcopal ChurchManpower IncorporatedUnited Technologies Federal-Mogul CorporationMarathon AshlandVerizon Communications First Data CorporationMarriottVerizon Wireless

19. 18 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

20. 19 Why Do We Care?