5 Lessons About Value-Based Insurance Design
by Adam Beck
October 30, 2017
Value-based insurance design (V-BID) is an approach that drives patients and providers to high-value services while discouraging low-value services. Many companies like IBM are applying V-BID principles to their employee health benefits, eliminating cost sharing for certain services that deliver the most value, and have been historically underutilized. The overall goal is to reduce the net cost of care by promoting better health outcomes that save money over the long term. At IBM, its pilot program eliminated out-of-pocket costs for primary care visits for children enrolled in the company’s self-funded health plan.
How does value-based design work and how are health plans and companies using these strategies to lower health care costs for employees? Dr. Paul Fronstin from Employee Benefits Research Institute (EBRI) and Linda Brady from Boeing Corporation joined AHIP on a webinar to share study results that examined IBM’s experience with V-BID and insights into Boeing’s value-based approach to health benefits. We learned:
- Value-based design is increasingly popular in public and private plans: Medicare Advantage launched a V-BID pilot program this year to encourage use of high-value services among seniors with chronic conditions, and the Defense Department is instituting its own pilot next year for military individuals and families who are enrolled in the TRICARE program. Companies from IBM to Boeing to Pitney Bowes apply value-based design principles to their employee health care benefits. So far, these value-based models have focused largely on chronic conditions requiring daily or frequent medication, such as diabetes and asthma.
- The benefits of V-BID go beyond cost savings: Results show getting rid of co-pays for patients can improve their adherence with medication for asthma, diabetes, and depression. The IBM case study looked at how eliminating cost barriers can improve employee health beyond treating chronic disease and found a promising number of IBM employees seeking high-value preventive services, though inconclusive. The trend is in the right direction, with minor increases in screenings and vaccinations for illnesses, such as colorectal, breast, and cervical cancers, and influenza and HPV.
- V-BID can lead to better health outcomes: By eliminating co-pays for primary care visits, more employees went to see their primary care provider (PCP). While this led to a measurable increase in costs for the employer as more people went to the emergency department they had fewer inpatient hospital stays, which offset the company’s emergency cost increase. Health care costs can be measured many ways. While it’s too early to measure the long-term impact, it’s important to note that the employees experienced better health outcomes, which lowers costs over a longer time horizon.
- Providers must be partners: For value-based design to achieve its full potential, providers – from hospitals to physicians to pharmacies – need to move from mere players to key partners in these efforts. Boeing found that a collaborative culture with medical providers who were open to change was essential to achieving lower costs. If providers are not invested in the program and the philosophy – and in turn won’t change their practice methods – then the intended changes never occur. Above all, Boeing emphasized that the patient must be at the center of the model, with health outcomes as the primary focus.
- Even for higher-earners, cost sharing is still a barrier: Eliminating co-pays is more than just a way to get low-income individuals to use high-value services. For Boeing employees, no cost sharing enabled them to visit their primary care doctors when needed and choose more affordable and effective generic drugs. Here, even patients who could afford a co-pay were less likely to seek care if there was any cost sharing involved. Consumers are driven towards utilization when no costs are involved, regardless of ability to pay.
To hear the full discussion on value-based design with Dr. Paul Fronstin and Linda Brady, watch the webinar recording here.