Our benefits columnist outlines four steps employers can take to ensure their health plans are designed to meet value-based standards.
The farther I advance along my life’s path, the more I appreciate the lessons my parents taught me, and their definition of value is no exception.
For most, value is a combination of cost and quality. When it comes to employee benefits, however, many employers appear to weigh cost over quality–especially when it comes to health-insurance design.
Quality, however, was always my parents’ barometer for the choices they made–even when it came to things such as clothing.
My parents met while working at their first jobs, which happened to be in the high-end textile industry. This gave us the opportunity to shop on Saturdays in the designers’ showrooms, and both parents taught me how to understand the quality of a garment.
The story that always stayed with me was research they described about how French women shopped for clothes. No matter how much income a French woman made, she would save her money–often a month’s salary–until she had enough to buy a beautifully constructed, classically designed black dress. It might, in fact, be the only dress she owned, but she knew it would last a long time and she could easily change how it looked by using inexpensive, trendy accessories.
It probably stands to reason that when I consider employee benefits, I’m always in search of the perfect-black-dress version of plan designs.
I recently shared lessons I learned when preparing for a medical procedure and hospital stay. To experience the best outcome, I chose to use to an out-of-network surgeon and hospital. The result was an out-of-pocket expense of about $20,000, but an outstanding outcome, one that was significantly better than if I’d chosen the in-state, in-network options.
The imbalance between cost and quality, particularly when it comes to benefits design, weighs heavily on me. So, when I was invited to participate in my state’s public/private effort to bring value-based healthcare to its residents, I signed on. Here was my opportunity to give back to my community and learn how to effectively take the long walk toward value-based care.
What is value-based care? You can trace the origins to a 2001 Health Economics paper written by a team led by the University of Michigan’s Dr. Mark Fendrick and Michael Chernew. Their proposal was to alter the management of prescription drugs by applying a benefit-based copay approach. In simpler terms, patient contributions to the cost of their prescription medications would be related to a drug’s ability to provide a high-potential benefit given the clinical nuances of the person’s condition. In 2005, Fendrick and his colleagues founded the Center for Value-Based Insurance Design to “promote the development, implementation and evaluation of health-benefit designs.”
At my first meeting with my state’s leaders in health insurance, healthcare delivery and employee benefits consulting, it became clear that there are myriad factors that drive value. One key issue that immediately captured my attention was, in a public/private partnership, if the value-based design doesn’t work for Medicare’s fee-for-service plans, it won’t carry over to the private sector. In my state, these plans account for 60 percent to 80 percent of the healthcare costs.
But there is recent great news related to Medicare and value-based care. On Feb. 9, when President Trump signed the Bipartisan Budget Act of 2018, he also expanded the CHRONIC Care Act of 2017. As Fendrick described: “This allows Medicare Advantage plans the flexibility to reduce cost-sharing for enrollees with specified conditions.” It also expands Medicare’s value-based insurance-design pilot to all 50 states by January 1, 2020.
Another piece of good news for those who care about value came from the federal legislative front. On Feb. 8, a bipartisan bill called the Chronic Disease Management Act of 2018 was introduced in the House and Senate. If passed, this bill would “allow health savings account-eligible high-deductible health plans to cover chronic-disease prevention and treatment on a pre-deductible basis.”
One of the main effects for individuals covered under a HDHP–including employer-provided insurance–is that necessary, high-impact prescription medications such as insulin would only be subject to a copay–even before the deductible is met. The hope is that people with chronic conditions would experience “improved outcomes via increased medication adherence, reduced complications and decreased emergency-department visits.”
For those of us invested in employer-provided health insurance, all this talk of Medicare (and legislation, affordable-care organizations and health information exchanges and social determinants of health) seems distanced from the immediacy of our needs.
And it’s not that employers haven’t been trying to seek both increased quality and decreased cost from their health plans. It’s simply that we’ve often used a piecemeal approach to solve a problem that needs a coordinated plan.
Immediately after my first meeting with my state colleagues, I sat down with my long-time friend and colleague Barbara Aiudi to talk through practical steps we could bring back to employers. (A nurse by training, Aiudi worked for more than 10 years within the United Technologies family of companies and is now a benefits consultant.)
The first place we started was the recognition that employers need to be self-insured to effectively structure their health-plan design to meet value-based standards.
With self insurance in place, HR executives can move to value-based contracting. This is where Medicare can become an employer’s friend. In this approach, employers negotiate with a third-party administrator or carrier for pricing that is a fixed percentage over what Medicare pays. Most employers currently pay 225 percent over Medicare rates. Employers can strike a deal for 160 percent over Medicare.
Second is to implement value-based-insurance design. As previously described, you allow your employees and their dependents to pay only the copay when they access high-value services–even if they have not met their deductibles. VBID is most often referenced when considering prescription-drug copays, especially generic medications, prescriptions designed to treat chronic health conditions, and precision medicine. But, even small, insured employers can use VBID by making high-value services more affordable.
In contrast, employers can also limit reimbursement for low-value services such as diagnostic testing and imaging prior to low-risk surgeries, non-clinically indicated Vitamin D testing, imaging for low-back pain within six weeks of pain onset and branded drug use when chemically equivalent generics are available.
The third step in the value-based healthcare strategy is to promote transparency of the costs and quality of healthcare to employees whenever possible. Admittedly, this approach is flawed because, while information is increasingly available regarding costs, quality measures are harder to find. Employee trust is also an issue because workers believe their employers and insurance carriers are trying to save money when they point them to restricted high-value networks.
Finally, employers can create high-value provider networks. These networks fall into three categories: narrow networks, which are often designed largely to save money; tiered networks, where quality of care is somewhat considered; and centers of excellence.
I’m a fan of the COE model because value is driven both by quality and costs. I’ve previously written about Lowe’s COE program. The retailer found that associates who use centers of excellence for treatment receive better outcomes and return to work three to four days sooner. Also, the company initially reduced $5 million of wasted spending.
Fendrick says one of the things that makes him lose sleep at night is using “blunt instruments such as copays, coinsurance and deductibles to control healthcare costs.”
My hope is that an increasing number of employers will broaden their viewpoint on how to manage healthcare and join me on this slow march toward value-based health. Designing health plans that encourage employees to decrease costs by using high-value services, providers and prescriptions is a big step toward achieving that goal.
