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Value-Based Insurance Design: Sense and Sensibility

A look at value-based insurance design, and how it provides a way to reduce financial barriers to care for people with chronic conditions.

Why Has It Been So Difficult to Implement VBID Principles?

While VBID principles seem straightforward, there clearly are obstacles on the path to VBID implementation. Some are obvious. For instance, reaching consensus on which services should receive minimal, if any, coverage is not easy, nor is determining which services, conditions, and patients merit more extensive coverage.
A second major issue is whether implementing VBID would, in fact, restrain cost growth. Fendrick and colleagues emphasize that the purpose of VBID is to improve patient and population health. However, they also recognize that any significant change in the US healthcare system will encounter serious headwinds if it adds to costs.6 “Given the pressure to constrain healthcare costs, value-based insurance design programs that exclusively reduce cost sharing have limited appeal.”7
When you think it through, as VBID advocates have, there are numerous other implementation issues that are less obvious, but nevertheless potential stumbling blocks. Ten years ago, Fendrick, Michael E. Chernew, PhD, and co-authors speculated on what these might be: VBID’s payoff may not be immediate; data limitations can make it difficult for payers to accurately target employees for VBID participation; patients and providers might misrepresent a patient’s condition in order to qualify for lower cost sharing; and issues relating to the legality of limiting coverage of some services, or for some types of patients, could arise.
These are first-level implementation issues, but there are other concerns as well. For instance, if VBID is used to lower or eliminate the cost of a particular service, it could reduce incentives for patients to seek out lower-cost treatment settings, further adding to payer costs. At the extreme, it could reduce the incentives for patients to work to reduce risk factors that contribute to their conditions. VBID’s possible impact on risk selection is also an issue for employers and payers. If VBID reduces costs for people with specific conditions, it might attract more people with those conditions into an employed group or health plan.8,9 And employees without the conditions which are treated preferentially in a VBID design might resent the cost reductions given to colleagues with the “chosen” conditions (“What about my illness? Isn’t it important?”)6.

What Has Been the Experience of Payers That Have Implemented VBID?

It is not clear how many payers actually have incorporated VBID principles in their benefit designs, although one benefits consulting firm estimates that approximately 20% of large employers do so.10 One article by independent researchers identified 76 pharmaceutical-based VBID designs implemented by a single pharmacy benefits manager.11 There also have been several case studies of individual employer plans.12,13 The general impression is that the use of VBID principles is growing but obstacles have proven to be significant, as anticipated.
The research on impacts of VBID suggests that VBID makes a significant difference in patient behaviors such as drug adherence. (As one payer observed, when you make something free more people will use it.) But these effects are not large. Programs based on VBID principles are designed and implemented differently by different payers and often are set in place along with other payer efforts (e.g. disease management programs).14 So, it is not surprising that outcomes vary in size and are sometimes difficult to attribute to VBID.
With respect to costs, significant impacts are more difficult to find: costs generally are highly variable as an outcome measure; studies are not “powered” to detect effects on costs; and all elements of potential cost savings (eg, reduced absenteeism) may not be included in study designs. Furthermore, VBID impacts on the costs of care for people with chronic conditions could occur outside the time period of the study. Finally, VBID programs to date have focused almost exclusively on “carrots” and not “sticks.” Incorporating “sticks” might improve the cost profile of these programs.
So, what can be said about payer experience with VBID to date? Conservatively, the findings of VBID evaluations have been positive with respect to impacts on patient behaviors and short-term outcomes—although the impacts are not large and are based almost entirely on medication studies.15 They are inconclusive with respect to costs. Yet the enthusiasm for VBID has not dimmed. The intuitive appeal of VBID designs for some patients or conditions is undeniable, and there have been recent developments that could accelerate their adoption looking forward.

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