WASHINGTON—Safeway Inc. is attempting to capitalize on the success of its incentive-based health plan by offering to set up similar programs at other employers for a share of the cost savings it generates.

Ken Shachmut, Safeway senior vp and executive vp of Safeway Health, a newly formed subsidiary of the Oakland, Calif.-based grocery store chain, announced its new business venture during a keynote address in Washington at the Business Health Agenda 2010 sponsored by the National Business Group on Health.

While it may seem incongruous that a grocery store chain would enter the health plan business, Mr. Shachmut said there are several other examples of innovation coming from outside a traditional business sector.

For example, cell phone company Sprint's origins go back to Southern Pacific Railroad, which built communications technology along the rights of way it controlled.

It also is not the first time that an employer has attempted to commercialize its successful health program elements. Sussex, Wis.-based printer Quad/Graphics Inc. formed QuadMed L.L.C. in 1990 to market its worksite clinic consulting services to other employers (see story, page 19).

Safeway gained recognition for its health plan success in 2008 when CEO Stephen A. Burd published an article in the Wall Street Journal describing how it had basically held its health care costs flat since 2005.

Safeway also takes credit for a provision in one of the health care reform bills pending before Congress that would significantly increase the potential rewards and penalties tied to wellness program participation. Under current law, any incentive paid to plan members is limited to 20% of the cost of single coverage. But under the “Safeway Amendment,” that sum would grow to 30%, and employers potentially could increase it to 50% with authorization from the Department of Health and Human Services.

Although Safeway's health plan is administered by Bloomfield, Conn.-based CIGNA Corp., Mr. Shachmut says the incentive plan and other consumerist elements, including greater transparency of provider and drug pricing, were developed in-house “with valuable input from CIGNA” and other firms, including Aetna Inc., United Health Group Inc., Towers Watson & Co., Mercer L.L.C., Hewitt Associates Inc. and others.

The most recent successes of the program include an increase in the number of employees and spouses who passed biometric tests related to tobacco use, cholesterol, body mass index, blood pressure and blood glucose levels, Mr. Shachmut said.

“About the middle of last year, we decided to try and commercialize our experience. We believe that what we have is transportable to other employers,” Mr. Shachmut said, adding that he felt “existing health care players are not well equipped to deliver the Safeway results.”

Safeway Health will provide analytics, plan design or redesign assistance, Mr. Shachmut said. As compensation, Safeway Health receives 25% of the savings generated over a five-year period.

“Under our business model, Safeway gets to share in the savings. We take no consulting fees,” he said.

Mr. Shachmut said that he had received “verbal affirmation from four potential clients” and is “in detailed negotiations with two of them.”

“It sounds interesting and, given that Safeway is a successful business, I expect they will figure out products and services that will be successful in the marketplace,” said Helen Darling, president of the NBGH, about Mr. Shachmut's presentation. “I will follow it with great interest. The more people we have working to stop the obesity epidemic and finding innovative ways to improve health, the better.”

A spokesman for CIGNA said, “Engaging consumers in their own health care is at the core of what CIGNA does as a business. We are committed to improving the health and well-being of the people we serve.”

“There is growing frustration among employers. We don't expect the government or insurers or providers to save us,” said John Neuberger, vp of operations at QuadMed. Instead, “we're all experimenting. They found a solution through benefit design, which I thought was very interesting. Some things are going to work, some better than others.”