5 Things to Know About Value-Based Insurance Design

As Americans as asked to pay a greater portion of their healthcare expenditures, new insurance design models are being implemented, such as value-based insurance design, to combat issues like nonadherence.

As the healthcare industry in the United States moves full-speed ahead with shifting from a fee-for-service environment to a value-based one, some tools will be especially helpful. Value-based insurance design (VBID) can be used to combat nonadherence as Americans are asked to pay a greater portion of their healthcare expenditures.

If you’re unfamiliar with the concept, here are 5 things to know about VBID:

1. The concept is 15 years old. The push for value-based care may just be gaining speed, but the concept of VBID was first introduced in 2001 by A. Mark Fendrick, MD, and Michael E. Chernew, PhD, before they became the co-editors-in-chief of The American Journal of Managed Care (AJMC). At the time, VBID was being called “benefit-based co-pay,” but the name was soon changed. The basic idea was that high-value services should cost less so they would be utilized more, and low-value services should cost more so they would be utilized less frequently.

2. VBID uses clinical nuance. Although more people are becoming familiar with the concept of VBID “clinical nuance” is still new. Clinical nuance recognizes that medical services differ in the benefit provided and that the benefit derived from a specific service can depend on the patient using it, as well as when and where the service is provided, explained Dr Fendrick, Jason Buxbaum, MHSA, and Jonas de Souza, MD, in a paper published in AJMC. Clinical nuance allows the healthcare industry to shift attention from how much we spend to how well we spend healthcare dollars. Payment models that are redesigned with the tenets of clinical nuance in mind are essential in the shift from volume to value, Dr Fendrick wrote in the Harvard Business Review in 2013.

3. VBID plans can improve adherence. Studies have supported the notion that setting patients’ cost-sharing amounts in relation to the value the treatment offers can reduce barriers that prevent patients from receiving or taking treatments as prescribed. In 2014, a study from Niteesh Choudhry MD, PhD, and colleagues, found that plans that were more generous, targeted high-risk patients, had wellness programs, did not have disease management programs, and made the benefit available only for medication ordered by mail improved adherence between 2 to 5 percentage points. A 2013 study reported that although VBID plans didn’t reduce overall medical spending, patients had a greater likelihood of filling prescriptions when health insurers offered financial incentives through a VBID plan.

4. Employers are seeing benefits to implementing VBID. Employers are using VBID to encourage use of and increase access to evidence-based health services. Pitney Bowes created and launched a VBID initiative in 2002, making it the first company to fully implement this approach. First the company reduced copayments for drugs that treat asthma, diabetes, and hypertension, then for statins. According to a study of the Pitney Bowes statin initiative, patient adherence to statins had stabilized with adherence 2.8% higher in the Pitney Bowes group compared with a control group immediately after the policy was implemented.

Companies like Caterpillar, Inc, Hannaford Brothers Company, and UnitedHealthcare have used a VBID approach to improve employee health, Dr Fendrick wrote in the report “Value-Based Insurance Design Landscape Digest,” which outlines how companies are using VBID to lower or eliminate financial barriers to high-value drugs or services.

5. Medicare Advantage is implementing a pilot.

In 2015, CMS announced that it would test whether providing Medicare Advantage organizations with the ability to integrate VBID would increase enrollee satisfaction, improve clinical outcomes, reduce plan expenditures, and save money for Medicare and beneficiaries. The model test is set to run 5 years in 7 states: Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvania, and Tennessee. This test is unique because existing regulations have prevented the incorporation of VBID in Medicare Advantage because these plans will not conform with the uniformity requirements.