Encouraging Value-Based Insurance Designs in State Health Insurance Exchanges | Page 2
Published Online: July 22, 2013
Christine Buttorff, BS, BA; Sean R. Tunis, MD, MSc; and Jonathan P. Weiner, DrPH
State health exchanges are faced with a spectrum of possibilities. At one extreme, a state could establish mechanisms to identify high- and low-value services, and then mandate that all participating health plans apply different cost sharing levels to the services in these categories. The other extreme is to do nothing, and let insurers continue experimenting with VBID as they wish. Overall, the latitude state health exchanges have in adopting any of the 4 options depends on what level of power state lawmakers give their exchanges to selectively contract with plans. As of January 2013, 7 state exchanges, such as California and Rhode Island, have opted to be “active purchasers,” allowing them more power to control which plans can offer insurance through the exchanges.11 Six states, including Colorado, Utah, and Hawaii, opted to organize the exchanges solely as a clearinghouse.
After the November election, many state lawmakers who had been opposed to the ACA opted to allow the federal government to operate their state’s exchange. It is unclear at this juncture whether the federally run exchanges will be involved in promoting certain types of benefit designs or whether they will allow any willing insurer to participate for these 27 states.
Option 1: Require Plans to Structure Copays According to State-Defined Highand Low-Value Services
Under this option, the state would set up a governing body to decide what services would be covered with reduced or increased cost sharing for plans entering into the exchanges. The advantage of this approach is that it would provide consistency with regard to services considered high or low value across VBID plans. Defining the services up front would prevent the plans from structuring copays in ways that might lead to risk selection, such as setting higher costs for certain drugs.
There is some precedence for state involvement in valuebased service determination. For its state-sponsored insurance programs, including Medicaid, Oregon compiles a detailed list of services it deems of high value, and covers as many of the services as possible with the funding allotted in a given year (Table 1). The Oregon Health Plan ranks medical services “in a way that represents the comparative benefits (ie, clinical effectiveness and cost-effectiveness) of each service to the entire population to be served.”27
Oregon’s 11-member Health Services Commission has an established process for selecting covered services, starting by ranking clinical areas from highest to lowest benefit. Common treatments and procedures are assigned to the clinical categories ranging from maternity and newborn care (category 1) to “inconsequential services” (category 9).28 These categories are then combined with a series of metrics to derive an overall score: clinical effectiveness, population impact measures, the need for the service, and the net cost (Figure).
Having a state agency regulate VBID for private insurers is a politically tough option as there are substantial technical and analytic challenges associated with identifying both highand low-value services. The US Department of Labor recently held an open comment period on VBID, and many patient groups, disease-specific advocacy organizations and even local health departments voiced concerns that VBID would be used as a way to limit access to medically necessary services.29
Decisions over the appropriate services to include as high or low value are not without controversy. For example, the USPSTF recently recommended delaying regular mammograms for women until after age 50 years due to the high rate of false positives.30 This could leave many women facing higher copays on mammograms conducted at earlier ages in a VBID policy. Oregon’s solution to the change in recommended screening frequency was to cover mammograms for all women aged 40 years and over if the physician advised it. After age 50 years, the state suggested that mammograms should be done every 2 years.31
There are several drawbacks to setting up a similar process elsewhere. The first is in timing. Oregon developed its method over a decade and a half, making it difficult to replicate elsewhere in a short period of time.27 There are also potential adverse consequences for states deciding to maintain small group or individual markets outside of the exchanges. Requiring some plans to offer certain services for free could raise the cost, forcing some people out of the exchange. However, the subsidies offered to lower premiums would likely make this result unlikely. More importantly, in order to curb any adverse selection in the exchanges, health plans are required to have similar premiums for similar coverage in and outside of the exchange.1
Alternative 2: Require Insurers to Design Their Own VBID Plans
Another approach to promote VBID would be to require HIE-participating plans to offer insurer-created value-based designs. The major advantage of this option is allowing flexibility for insurers. In the Department of Labor’s open comment period on value-based designs, the Blue Cross Blue Shield Association commented that because the field is still emerging, insurers need the flexibility to innovate.29 Researchers at the University of Michigan’s Center for Value-Based Insurance Design also urge flexibility, arguing that mandating too many benefits could limit an insurer’s ability to offer plans in the lower-cost bronze tier.32 If insurers were required to offer too many benefits free of charge (as in Alternative 1), then it could be very hard for the insurer to offer the basic benefits plans that would be part of the exchange’s bronze tier—the 60% actuarial value tier.
Alternative 3: Incentivize/Encourage Insurers to Offer VBID Plans
Incentivizing insurers could promote VBID without facing the potential negative political consequences of mandating non-coverage of low-value services. The University of Michigan’s VBID Center offered a brief piece of guidance on this issue. The authors argue that states need to allow for flexibility in setting up the plans, that states should not set uniform cost-sharing levels, and also suggested that VBID could represent a plan quality performance measure.32 For example, a state could consider whether a plan incorporated VBID as one quality indicator when evaluating which plans are qualified to sell in its exchange. In such a case, plans using VBID could be rewarded with extra “points” in a request for proposal process. Maryland’s lawmakers took this route when writing the legislation enacting the state’s exchange board, indicating that VBIDs could be used as 1 criterion for plans to be selected into the exchanges.33 Exchanges could also encourage the selection of particular services for inclusion in VBID designs. Items a state could incentivize might be zero copays on generic drugs for treating chronic diseases. Massachusetts issues requests for proposals for insurers wanting to participate in its exchange,and scores them on how well they do at providing consumers “good quality and value, according to standards set by the Connector.”34 Plans receive better scores if they have “innovative pharmacy management” and incentives for wellness.35
One final example of incentive-based encouragement is the quality ratings the Centers for Medicare & Medicaid Services (CMS) uses for assessing Medicare Advantage plans. The health reform bill allows CMS to make incentive payments to Advantage plans if they meet certain quality benchmarks.36 For example, one of the metrics evaluates the plans’ ability to have patients up-to-date on screenings and vaccinations. While not directly linked to value-based designs in terms of reduced cost sharing for certain services, this program does serve as a possible template in encouraging the use of more highly valued services.
As an alternative to direct incentives, states could also encourage insurers to offer VBID plans in the exchanges. The closest existing example for this approach would be Oregon’s VBID recommendations. Oregon has 2 separate pieces to its VBID processes (see Table 2). There is the formal priority setting that makes the list of covered services and establishes the varying levels of copays for all of the public plans under the state’s control, as mentioned above. It then created a separate list from this process, which comprises recommended highvalue services for the commercial market. The commercial plans are not required to adhere to the recommendations.37
Oregon’s approach for commercial payers is a relatively hands-off one for selecting certain services for reduced copays as part of the plans, but does take advantage of Oregon’s research-based priority setting process for identifying services for reduced copays. While evidence is scarce on whether the private plans in Oregon take up the recommendations, the public employee plans do take the suggestions into account.38 The boards overseeing these plans chose to both raise copays on certain undervalued services like emergency department visits and lower them on several highly valued services such as vaccinations. The program was adopted in 2010 and has yet to be evaluated. Oregon’s experience represents a way states could encourage VBID plans.
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