Initial Experience With a First-to-Market Member Accountability-Based Insurance Product

The American Journal of Managed Care, October 2010, Volume 16, Issue 10

A new insurance product based on principles of member and purchaser accountability was adopted rapidly and resulted in several health improvements.

We describe the initial experience with a first-to-market health insurance product design based on principles of both member and purchaser accountability. Two benefit levels were offered, enhanced and standard. Qualification for the enhanced benefit level was obtained through members' commitment to follow their physicians' recommended treatment plan. Employers were offered a discount of 10% in exchange for offering this new product and promoting a healthy work environment. Membership in the product grew beyond expectations, and several health improvements were noted.

(Am J Manag Care. 2010;16(10):e251-e255)

A new type of insurance product based on innovative financial incentives resulted in a higher level of both member and purchaser accountability for working toward and promoting a healthy lifestyle.

  • Insurance products should be designed to promote wellness and a healthy lifestyle.

  • Financial incentives can be used as a strong motivator for both members and employers to work toward a healthy lifestyle and a healthy work environment.

  • Aligning incentives among members, employers, physicians, and the health plan is critical for achieving desired outcomes.

Only about 3% of US healthcare expenditures are for prevention and wellness, versus the 97% that is spent on the treatment of acute and chronic illness.1 Although there is some debate about the extent to which focusing on health promotion, wellness, and prevention would ameliorate the continued escalation of healthcare costs, most believe that it is an approach worth pursuing or, at the very least, an approach that merits further study.2,3 Underscoring the lack of attention to wellness and prevention is the issue of patient noncompliance. It is well-known that the behavioral patterns of many individuals reflect their tendency to care less about the future than the present (eg, the immediate gratification of eating outweighs the long-term, uncertain consequences of being overweight or obese).4 It also has been documented that adherence to treatment is associated with better health outcomes, even when the treatment is a placebo.5 Medication noncompliance is an especially common and serious problem, and contributes to poor outcomes and substantially higher costs.6 This lack of attention to wellness, prevention, and compliance creates a spiral of increasingly poor outcomes and escalating costs.


In October 2006, Blue Care Network of Michigan, the health maintenace organization subsidiary of Blue Cross Blue Shield of Michigan, launched a new product called Healthy Blue LivingSM. The product was designed to incorporate member accountability for following a healthy lifestyle (ie, personal responsibility) and employer commitment to wellness (ie, purchaser responsibility). It tested whether strong financial incentives, embedded directly in the product design and linked to the employees’ cost sharing and benefit coverage level, would result in improvements in both health and costs. The strategy was to create a partnership among 4 key players: the member, the member’s primary care physician, the employer, and the health plan. We report on the first 3 years of experience with this product.

Healthy Blue Living was first offered in October 2006 after design work that included employer feedback, member and employer focus groups, and multiple conversations with physicians, agents, and other healthcare experts. Most constituents believed that members with unhealthy lifestyles should pay more for their healthcare than those who take care of themselves. This thinking was aligned with a 2006 national poll of US adults who thought it was fair to ask people with an unhealthy lifestyle to pay higher insurance premiums.7 The product had 2 benefit levels: enhanced and standard. The enhanced benefit level had 20% less employee cost sharing than the standard benefit level.


Every enrollee received the enhanced benefit for the first 90 days. Within this first 90 days, members and their spouses, if applicable, had to complete 2 tasks. First, they had to take a health risk assessment. Second, they had to visit their primary care physician and complete a Healthy Blue Living Qualification Form. The qualification form focused on 6 conditions: cigarette smoking, weight, blood pressure, blood sugar, cholesterol, and alcohol use (). These 6 conditions were selected because they are leading causes of controllable healthcare costs, they are highly prevalent in the population, the downstream costs of inadequate control are considerable, and several of them have been linked to greater absenteeism, reduced productivity, increased workers' compensation costs, and higher disability expenses.8-11 The qualification form assigned 15 points to each condition with the exception of smoking, which was worth 25 points in recognition of the critical importance of smoking cessation in facilitating rapid reductions in morbidity and benefit costs. To continue to qualify for enhanced benefits beyond the first 90 days, a member had to receive 80 or more points on his or her qualification form. Failure to receive 80 or more points on the qualification form, failure to complete the qualification form, or failure to complete the health risk assessment automatically moved the member and his or her family to the standard benefit level.

To achieve the associated points, members had to commit to their physician’s recommended treatment plan, which typically included adhering to an appropriate diet, exercising, taking prescribed medications, and complying with other appropriate interventions. Members who committed to quit smoking were required to join Blue Care Network of Michigan’s Quit The Nic program, a phone-based smoking cessation program. Physicians determined when their patient had to return for follow-up.

A critical feature of the product design was the conversation between the member and his or her physician. Accuracy in completing the qualification form was emphasized to the physicians during the orientation period. A second important component related to the employer. In exchange for receiving a 10% discount, employers had to have a smoke-free work site and agree to support their employees in their commitment to following a healthy lifestyle. Support included offering onsite exercise or nutrition classes and offering healthy foods in their vending machines or cafeteria. Employers who would not commit to a smoke-free environment or who would not support their employees in their health improvement efforts were not offered the product.


Our initial efforts to measure the effectiveness of this new plan fell into 3 general categories: (1) attitudes about the plan as tracked by constituent reaction and sales, (2) effectiveness of the plan as tracked by the percentage of members qualifying for enhanced benefits, and (3) cost reductions as measured by claims cost and the number of people who demonstrated health improvements.

Attitudes About the Plan

Constituent reaction to the plan was significant and positive. Agents, employees, employer purchasing representatives, physicians, journalists, and legislators all endorsed it. This was evidenced by the rapid growth of the product, enthusiastic physician acceptance, supportive press coverage, and positive member and physician survey results. Membership exceeded expectations and was more than 60,000 in year 1 and more than 105,000 in year 3.

Enhanced Benefits and Promised Health Improvements

Approximately 70% of people qualified for enhanced benefits, and 30% defaulted to standard benefits. The percentage varied by group size and whether or not the employer offered other health plan options. In general, larger employers took more steps to let their employees know about the need to complete the necessary office visits and paperwork. In addition, many large employers gave employees a choice of plans so that people who did not want to make a lifestyle change could enroll in another plan. In these larger plans, a higher percentage of people qualified for enhanced benefits.

With regard to promised health improvements, more than 90% of members who went to see their primary care physician committed to following the physician’s recommended treatment plan. Only alcohol use showed less than a 90% commitment level.

Cost Reductions and Demonstrated Health Improvements

To measure the extra cost associated with the 6 lifestyle factors targeted by the plan, we reviewed claims results.


After adjusting for age, sex, and benefits, we observed extra cost associated with 5 of the 6 conditions. Only those people with high cholesterol did not have extra cost, which was probably related to the long latency period before high cholesterol is likely to impact health status. Those with diabetes and a body mass index of more than 30 had the highest extra morbidity ().

Four additional observations can be made based on Healthy Blue Living data: (1) People with multiple conditions generated significantly higher costs than people who were working to improve only 1 lifestyle choice; (2) Individuals who retained enhanced benefits by taking steps to improve their health generated an average cost increase, whereas those who took the standard benefits generated very high cost increases; (3) Weight control was the area most resistant to change; and (4) Physicians were quite willing to accept a promise of improvement 3 years in a row, even though results fell short of expectations. That was demonstrated by the substantial number of members who continued with enhanced benefits through the first 3 years without meeting their targets. Numerous anecdotal comments from physicians indicated they do not want to play “insurance policeman” and are generally “lenient” with their patients.


Experience with this new product revealed several themes. First, the product design, which links member accountability for improved health to the level of benefits, was critical for obtaining member engagement. More than two thirds of enrollees followed through and completed both the health risk assessment and the qualification form. In the first year of the program, approximately 70% of members who completed a qualification form indicated they would make at least 1 health improvement as a result of the product design.

Second, although physicians supported the qualification form process, they were inclined to give their patients (ie, members with enhanced benefits) the benefit of the doubt, even when patients did not follow the recommended treatment plan. More than 99% of members who saw their physician for completion of the qualification form were “passed” by the physician with 80 or more points. Many physicians reported feeling pressured by some patients to make sure they received the highest level of benefits.

Third, despite the leniency on the part of the physicians, the product resulted in improvements in member health. For example, 71% of members who agreed to get their blood pressure under control were able to do so, and 61% of members who were identified as having inadequate blood sugar control achieved an acceptable level of control. Members achieved these improvements because the product design linked the level of benefits to their commitment to maintain or improve their health. Some members clearly did not improve, which demonstrates the known difficulty of behavioral change and compliance.

The product has proved enormously attractive for 3 reasons:

1. Employers realized a 10% discount compared with plans that had a similar level of (enhanced) benefits and now believe that their future healthcare costs will be based on improved employee health habits.

2. Most people believe their good habits should be rewarded and, to a lesser extent, that they are responsible for their unhealthy habits.

3. Health improvements attributable to the plan have been encouraging to members, employers, and physicians.

Initial experience with the Healthy Blue Living product design shows that an insurance product that promotes wellness can drive important improvements in health. Products like this plan, which promote members’ commitment to improving their health, appear to have substantial potential to positively impact healthcare costs and quality.


We thank Joe Bojman, FSA, MMAA; Jan Jennings, MS; Rami Garrett, BS; Udhay Ratnasamy, MS; and Pam Reinert, MSN, for their valuable comments and contributions. None of these individuals received direct compensation for their contributions.

Author Affiliations: From Blue Cross Blue Shield of Michigan (DRW, DRN), Detroit, MI; Blue Care Network of Michigan (DRW), Southfield, MI. Funding Source: There was no external funding for this research.

Author Disclosures: The authors (DRW, DRN) report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (DRW, DRN); acquisition of data (DRW, DRN); analysis and interpretation of data (DRW, DRN); drafting of the manuscript (DRW, DRN); critical revision of the manuscript for important intellectual content (DRW, DRN); and statistical analysis (DRN).

Address correspondence to: Douglas R. Woll, MD, 3311 Woodview Lake Rd, West Bloomfield, MI 48323. E-mail:

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