In an effort to mitigate rising health insurance premiums and increase overall efficiency within the healthcare industry, an increasing number of insurers and employers are integrating value-based insurance design into their group health plans.
For everyone involved -- including insurers, providers, employers and employees -- insurance plans integrating value-based design help to spotlight and migrate healthcare to services that have been proven to yield better results vs. those which are less effective.
Value-Based Insurance Design Recognizes Value
Value-based insurance design recognizes that not all healthcare services provide patients with the same level of value. Simply put, some health services are more effective than others.
These insurance plans seek to encourage employees to use services that have proven to be more effective and beneficial. Decisions on which services to encourage aren’t made on conjecture, but rather are based on research that shows which services have the best positive impact on patient health given the resources invested. In most cases, encouragement is created in the form of financial incentive (e.g. lower copays).
Some of the highest value services are outpatient treatments offered at clinics, and most value-based designs focus on promoting clinical services. There is a particular surgical example, however, that illustrates how these plan designs work.
The Colorado Springs School District 11 implemented a value-based insurance design for certain surgical procedures. The district’s new plan charged higher copays for open surgeries and less for comparable minimally invasive procedures that were done laparoscopically. Generally speaking, laparoscopic procedures cost less, result in better outcomes and require less recovery time than their open counterparts. Thus, there are multiple reasons to encourage them.
In this particular case, employees who had their appendix removed could have it taken out through an open procedure or a laparoscopic one (assuming both were medically suitable). The plan charged higher copays for open procedures and lower copays for the laparoscopic ones, giving employees even more incentive to take advantage of the generally preferable minimally invasive option. Similar options were offered for gallbladder surgeries, hernias and hysterectomies.
Influencing plan participant choices by financially incentivizing the more effective surgeries, procedures and services is precisely what value-based design tries to do.
Other Examples of Value-Based Insurance Design
Here are a few other examples of value-based insurance design:
- Improving Medication Adherence Rates: To improve medication adherence rates for those being treated for high cholesterol but showing gaps in care, an employer might eliminate copayments for cholesterol-lowering statins.
- Smoking-Cessation Programs: To help employees quit smoking, an employer might utilize cessation programs as a means to incentivize employees to participate. Here, employers might reimburse employees for the cost of nicotine patches, nicotine gum, nicotine lozenges, nicotine nasal spray, nicotine inhalers, Bupropion, Varenicline, and individual, group or phone counseling.
Spotlighting Centers of Excellence: To encourage those seeking care to select a recognized center of excellence for a particular procedure (perhaps something like a heart value repair or knee replacement), an employer could offer a cash stipend of a certain amount to offset travel and lodging expenses incurred by the patient due to selecting that facility (which may be otherwise geography undesirable).
The Affordable Care Act is the Foundation of Value-Based Insurance Design
The foundation of value-based insurance design is built into the very structure of the Affordable Care Act. In fact, certain value-based design features are legally required by the act.
Section 2713 of the ACA outlines the value-based elements that are required by the act. Per this section of the law, all health plans must offer specific preventive services without a patient copayment. Some of the preventative services required are blood pressure screenings, colorectal cancer screenings and sexually transmitted infection screenings. A few other service requirements vary depending on a participant’s demographic information.
While many of the ACA’s legal stipulations were new, the concept of value-based design wasn’t actually novel at the time of the law’s passing. In fact, many insurance plans had been incorporating certain value-based design elements into their benefits for years. Perhaps the most common example of this has been covering the full cost of annual or semiannual preventative checkups, which was fairly common even before it was legally required.
Value-Based Designs Provide Real and Substantial Results
Where they’ve been implemented, value-based designs have provided real, measurable and substantial results.
In the Colorado Springs School District case study, the results were twofold. Not only did the district’s plan pay less for the minimally invasive procedure, but employees who had the laparoscopic procedures done missed less work. Compared to their colleagues who had open surgeries done, those who opted for laparoscopic ones came back much sooner:
Minimally invasive hernias resulted in 21.9 fewer days missed
Minimally invasive gallbladder surgeries resulted in 21.7 fewer days missed
Minimally invasive colectomies resulted in 18.9 fewer days missed
Minimally invasive appendectomies resulted in 3.2 fewer days missed
Minimally invasive hysterectomies resulted in 7 to 9 fewer days missed
Of course, coming back sooner had special benefits since this was a school district. In addition to the benefits that any employer would appreciate, the reduced recovery times often also meant that students had their main teachers return sooner. That would only help further the students’ education.
Some other organizations that have seen value-based design principles work well include:
Chippewa County, Wisconsin, which decided to waive out-of-pocket expenses for nutrition coaches, chronic condition medications, colonoscopies and diabetes education. The county was able to reduce its per-person expenditures by $724 and save over $1.7 million total.
IBM, which in the initial stages of a value-based design case study were able to increase screening and vaccination rates slightly. Rates for services related to colorectal, breast and cervical cancers went up, as did those for services aimed at influenza and HPV.
Blue Cross Blue Shield, which has been able to slow the rise of healthcare cost increases through value-based design principles.
There Are Minor Potential Limitations and Complications
As promising as value-based insurance design has proven to be thus far, the concepts do come with some limits and complications.
First, most value-based design principles have been applied to preventative care (as mentioned), and chronic disease treatment and prevention. While reducing medical costs associated with chronic conditions certainly has big benefits, hopefully more of these designs will expand to include non-chronic medical issues as well. (The Colorado Springs School District's plan is a welcome pioneer in this area.)
Second, adding value-based design to a plan necessarily increases the plans complexity because various incentives must be offered. The level of complexity added isn’t insurmountable, but employers and insurers should be prepared to help plan participants fully understand their choices.
Learn More About Adding Value-Based Design to Your Company’s Health Plan
To learn more about value-based insurance design and how your company might implement such a program, contact one of our representatives. Our team members are well-versed in these types of health insurance plans, and they’re able to assist in exploring whether this concept is right for your company.
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