Suzanne F. Delbanco is the executive director of Catalyst for Payment Reform (CPR), an independent, non-profit corporation working to catalyze employers, public purchasers, and others to implement strategies that produce higher-value healthcare and improve the functioning of the healthcare marketplace. In addition to her duties at CPR, Suzanne serves on the advisory board of the Blue Cross Blue Shield Institute. Previously, Suzanne was the founding CEO of The Leapfrog Group. She holds a PhD in Public Policy from the Goldman School of Public Policy and a MPH from the School of Public Health at the University of California, Berkeley.
This article is co-written by Suzanne Delbanco, PhD, MPH, executive director, Lea Tessitore, MBA, MSB, senior project and research manager, and Julianne McGarry, MPP, director of projects and research, for Catalyst for Payment Reform.
Value-based insurance design, or V-BID, is a health insurance benefit model that dates back to the mid-1990s. Since its creation, it has been implemented in various ways, but always with a goal of achieving higher-quality, more affordable care. A recent incarnation can be found in President Donald Trump’s June 2019 executive order, and the introduction of bipartisan legislation allowing high-deductible health plan-health savings accounts (HSA-HDHPs) to cover certain services that help people better manage their chronic conditions prior to meeting the deductible. A prior example is the Patient Protection and Affordable Care Act, which adopts the principles of V-BID by requiring all health insurance carriers to offer a certain set of essential preventive services without copayment. With growing urgency to improve health outcomes and spend less money, employers are increasingly interested in V-BID as a way to match their employees’ share of health care costs with the value of the care they seek.
V-BID uses economic principles and behavioral economics to shape consumer care seeking behavior by shifting or adjusting cost sharing for medical services of different value. To expand access to these high value clinical services, V-BID reduces or removes financial barriers through lower, or zero, patient cost sharing arrangements. V-BID can also be used to eliminate coverage or raise consumer cost-sharing for services deemed to be low value. Moreover, V-BID aligns the incentives of the patient with those providers face — provider payment models tie payment to provider performance on the delivery of preventive services.1-3
Evidence from Public Purchasers
To date, V-BID has shown potential to reduce costs, particularly among programs implemented by public purchasers. Many state and local governments have introduced V-BID into public employee benefits packages to promote high value care and encourage employees to be active health care consumers who engage in and manage their health care decisions. Examples include the states of Connecticut, Oregon, and Minnesota.
Facing a $3.8 billion budget gap for fiscal year 2012, the state of Connecticut launched the Connecticut Health Enhancement Program (HEP) in October 2011 to try to control long term costs. The HEP uses V-BID principles to reduce financial barriers for evidence-based services and imposes disincentives on low-value care. For instance, HEP featured full coverage for preventive care, reduced cost sharing for office visits and medications for patients with specific chronic conditions, but increased cost sharing for non-emergent visits to the emergency department. Enrollment in HEP was voluntary. The program produced a 13.5% increase in office visits for preventive care in the first year and a 4.8% increase in the second year. In addition, there was a 1.6% increase in the likelihood of having an office visit for chronic conditions in year 1, with a 1.2% increase the following year. The HEP increased lipid screenings among those over 50 years of age by 20.1% in year 1 and 7.8% in year 2. Emergency department use among HEP enrollees declined as well.4,5
In 2010, the Oregon Public Employee Benefit Board and Oregon Educators Benefit Board took a similar approach with state employees. These organizations purchase benefits for 128,000 state and university employees as well as 155,000 public education employees and their dependents. In both programs, enrollees face higher co-insurance and copayments for certain low-value services including particular imaging services, sleep studies, spinal surgeries, and upper endoscopies, while a $500 copay for procedures such as knee arthroscopy and sinus surgery was introduced under the Public Employees’ Benefit Board program. Patients in this program do not have a copay for in-network office visits for chronic conditions, preventive services, insulin, diabetes supplies, and certain prescription drugs. In December 2016, the National Bureau of Economic Research examined the impact of the program implemented by the Oregon Educators Benefit Board and found that the V-BID significantly reduced utilization of targeted services. Member response to the plans has also been positive.2,6,7
Lastly, Minnesota implemented a pilot V-BID program in 2018 for the State Employee Group Insurance Program (SEGIP) Minnesota Advantage Health Plan members diagnosed with diabetes. The program was designed to reduce the progression of diabetes among members and the risk of costly and dangerous complications. Under this benefits plan, members’ out-of-pocket costs for high-value services, primarily for diabetes, are significantly reduced. Out-of-pocket costs for certain diabetes medications and screenings are also lower. For instance, diabetic retinal eye exams and medication consultations have no copay, low-density lipoprotein (LDL) panel, urine protein, glucose, and glycated hemoglobin (A1C) tests are covered without coinsurance, while diabetic testing supplies, including covered insulin pumps and continuous glucose monitors, have only 10% coinsurance. However, it’s too early for results.8
Under the Medicare Advantage V-BID Program (MA V-BID), eligible Medicare Advantage plans offer supplemental benefits or reduced cost sharing to enrollees with CMS-specified chronic conditions, including diabetes, congestive heart failure, chronic obstructive pulmonary disease, past stroke, hypertension, coronary artery disease, dementia, rheumatoid arthritis, mood disorders as well as combinations of these. The program began in January 2017 and is slated to run for 5 years. The initiative started in 7 states (Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvania, Tennessee) and expanded to Alabama, Michigan, and Texas in 2018. The program will be implemented in 15 additional states this year. Actuarial modeling of the MA V-BID programs for diabetes, chronic obstructive pulmonary disease, and congestive heart failure shows reductions in consumer out-of-pocket costs for all 3 conditions, with plan costs increasing in the short term for diabetes and COPD and decreasing for congestive heart failure. However, increases in cost sharing seem to be adversely affecting vulnerable populations leading to poor outcomes, and increasing Medicare expenditures in certain areas. Diabetes program costs were neutral, and the program experienced net savings for COPD and congestive heart failure.9,10
Evidence from Commercial Health Plans
In addition to public purchasers, large commercial health plans have also implemented V-BID programs. A 2013 systematic review in Health Affairs of V-BID prescription drug programs in commercial plans found that lowering cost sharing on targeted drugs mostly improved adherence and lowered consumer out-of-pocket costs without significantly increasing total spending. Additionally, in January 2008, Blue Cross Blue Shield of North Carolina implemented a V-BID program that eliminated copayments for generic medications to treat hypertension, hyperlipidemia, diabetes, and congestive heart failure for all employees of employers that opted into the program. Copays for brand-name medications were also lowered for all of the health plan’s enrollees. The program resulted in medication adherence improving from 2.2% in 2008 to 3.4% the next year. However, changes in total health expenditures or emergency department utilization were not significant, despite a small decrease in inpatient admissions.11 UnitedHealthcare has also implemented V-BID programs. The carrier’s Diabetes Health Plan gives incentives, such as free services and medications, online monitoring, wellness coaches, and self-management programs, to diabetic and prediabetic patients who follow their treatment plans and evidence-based guidelines. According to UnitedHealthcare, the program can save plan members from $250 to $500 a year by not paying for diabetes-related pharmaceuticals.3
Evidence from Private Employers
Public evidence supporting V-BID on the employer side is more limited. In 2002, Pitney Bowes became the first company in United States to implement a V-BID program based on the hypothesis that if employees with chronic conditions had fewer barriers to getting their medications, both employees and the company would benefit from lower costs and higher productivity. A company study confirmed that employees with chronic conditions who filled their prescriptions only two-thirds of the time or less were more costly to the company’s insurance plan. Thus, Pitney Bowes set the cost sharing for diabetes and asthma medications according to the value of medication adherence rather than the cost of the drugs, lowering coinsurance rates for these medications to 10%. As a result, the average amount spent on prescription drugs by asthma and diabetes patients decreased by 10% at a time when costs for all other employees without these conditions increased by 11% each year. Following this change, emergency room visits fell 35% for diabetes patients and 20% for asthma patients. Pitney Bowes’ V-BID strategy returned $1.33 in savings for every dollar the program spent in the three years that followed.12,13
What’s Next for V-BID?
To date, many V-BID programs have focused on patients affected by chronic diseases like diabetes, asthma, and arthritis to help them proactively manage their care. V-BID strategies mainly rely on upfront investments into patient health to create long term savings. This means for a payer or purchaser to experience savings, they need low turnover, or they need V-BID to be widespread.13 Moreover, V-BID is more complex than some other benefit designs, making it potentially more difficult for consumers to understand; clear communications and ongoing education are critical. Furthermore, incorporating the cost sharing information into consumer-facing health care price information tools may make it easier for consumers to understand how V-BID impacts their out-of-pocket costs. Early evidence for V-BID suggests it is a promising option for employers looking to improve employees’ health outcomes and decrease the cost of care by expanding access to high-value clinical services. As more employers implement V-BID strategies, the evidence for V-BID in the private sector will continue to grow. The full potential of V-BID for employers is yet to be realized.