subject: Employers Lower Health Care Costs With Value Based Benefit Design [print this page] What if I told you that your company could possibly get both access to high quality care and at the same time avoid unnecessarily high health insurance rate increases? Well, with Value Based Insurance Design (VBID), you may be able to.
Smaller, fully insured groups pay the same premium irrespective of what their claims are, so they may not benefit as much from a Value Based Insurance Design. However, carriers, who are beginning to offer such plans will usually offer lower rates when such provisions are included, so even smaller employers may be able to benefit from this emerging revolution in health care.
If an employer shares in the group's experience and also has some measure of control over the design of the benefits, VBID offers greater opportunity for cost reduction. In other words, if an employer partially self funds his health plan, he will benefit directly from the lower costs associated with VBID. And because of the ever-increasing health insurance costs and the ever-greater creativity of insurers, smaller and smaller companies are evaluating and able to participate in partial self-funding of health insurance.
How does Value Based Insurance Design integrate with the idea of controlling the costs of your health plan?
Low Value Vs. High Value Services
Value Based Insurance Design aims to get the maximum health outcome at any given level of health expenditure. It tries to get employers to think strategically and intelligently about what incentives and disincentives they offer their employees.
How is that done? By correctly aligning cost sharing with high value and low value outcomes, not simply with the cost of a procedure. For example, knee replacement surgeries may relieve pain, but they are basically a low value outcome in that they don't increase the patient's overall health.
On the other hand, close monitoring of a diabetic's glucose levels has a high value outcome because if maintained properly, expensive declines in the patient's health can be avoided.
Therein lies the goal of Value Based Insurance Design. We learned as long ago as the 70's that increased cost sharing led to reduced use of certain services. The initial study was based on drugs, and the finding was that if we increase the employee's drug copay, they'll be less likely to use as much of the drug, thus reducing pharmaceutical costs.
But there's an ugly side effect. Drugs help keep people healthy, so reduced use of drugs led to increased use of non-drug services to attack the outcomes caused by prescription avoidance. In other words, we were paying to repair damage that might not have occurred if the patient had stuck with his drug regimen.
Measuring Clinical Benefit Value, not Just Cost
The key is that the initial attempts to reduce costs were ham-handed. If something was expensive, the patient/employee was made to pay more via deductibles and copays and coinsurance. That, of course, led to reduced usage today and increased usage in the future.
Dumb approach, with the benefit of hindsight.
Now what VBID is trying to do is to measure the value of clinical outcomes. If taking a drug or monitoring a condition is crucial to an improved clinical outcome, it is something that Value Based Insurance Design will seek to encourage.
How does it encourage such behavior? By reducing its cost. People value health, but they only have so many dollars to spend on it. Often some routine test is seen as less necessary if its cost is even mildly burdensome, so the patient skips it. If that cost is reduced, he's more likely to continue with his treatment, get his evaluation, and maintain his good health.
And on the other hand, if a treatment is of limited "clinical outcome value" the cost of getting that treatment will be increased via copays, deductibles, etc. As a University of Michigan Report says, "While a variety of stakeholders have defined VBID differently, there is consensus on the core element of VBID: getting more health out of every health care dollar."
This approach requires more education and communication on the part of the employer. That's why it works best for a partially self funded group plan: in such a plan the employer actually benefits from the reduced claims his employees submit and their increasing health profile.
Quietly, ever so quietly, Value Based Insurance Design (VBID) is offering hope to employers and public policy types alike.
