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Value Based Benefit Design Helps Employers Lower Health Insurance Costs

By James Edholm

Republish: EasyPublish™ Published: 21Dec2010 Word count: 753 Viewed: 449 time(s) Get Free Content For Your Site

Both group health care/health insurance cost and access to quality care are concerns. Employers want to get both, effectively and affordably. Value Based Insurance Design (VBID)may offer an answer.

There is less benefit to a Value Based Insurance Design for fully insured (smaller) groups because the premiumm is the same irrespective of the claims presented for payment. 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.

But VBID's ability to offer help for employers is particularly valuable for the employer who has some control over the design of her plan and who shares in the experience of their group. 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.

So what is Value Based Insurance Design and how does it fit into the mix of cost control measures being undertaken?

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 does so by trying to direct employers into intelligently, strategically planning out their cost-sharing strategies with their employers.

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 want to be healthy, but people have limited budgets. 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.

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