For decades, health care consumers have been told once you have a problem, then you should go to the doctor. But now, as high-deductible health plans become ever more prevalent, employers are encouraging employees to go to the doctor first - before they get sick - and in turn the employer will often cover the visit at 100%.
This is an element of value-based benefit design which, in part, means if something works in preventing health issues the plan will pay for it, says Michael Jacobs, vice president of national accounts at New York City-based Truveris, and a pioneer in the field.
With more than 30 years of experience in the health care field, including as the national pharmacy and clinical practice leader for Buck Consultants, principal and regional pharmacy practice leader at Mercer, and as a board member of the Center for Health Value Innovation, Jacobs champions the VBBD model. The value-based approach takes advantage of the available options, he says, predicting which preventive measures are going to work and how to prevent catastrophic expense.
For example, for a pregnant woman with no previous health issues it makes financial sense for her to keep all of her prenatal checkups and take her daily prenatal vitamins to try to prevent premature birth or a caesarian section - which can be more than $5,000 above the cost of a full-term vaginal delivery. The example of encouraging proper prenatal care shows that value-based design is "worth the investment up front," says Jacobs, yet he cautions that the VBBD concept gets more complex when applied to other employee health scenarios - making education from the broker a vital component to its success.
Jacobs is unique in this field, says Cyndy Nayer, president and CEO of the St. Louis-based Center for Health Value Innovation. "[He's a] diligent and accomplished analyst, [who] provides consistent improvement in health plan design that is more than single-silo management but cuts across clinical and behavioral discipline," she says. "Yet the part of Michael's expertise that is wildly attractive to his clients and colleagues is his humanity, which he wears proudly and visibly in every analysis: Michael never recommends a plan design or sequencing without considering the impact at the person and family level.
"His recommendations are tempered with real-life experience for the highest regard for unintended consequences, creating wins for the client organization, their workers and their communities," she adds.
Changing patterns
High-deductible health plans - those with deductibles of $2,500 or more - came into widespread practice under President George W. Bush with legislation enacting tax-favorable status to health savings accounts and health reimbursement accounts. These had the intention of making the consumer a better end-user of health care, Jacobs says, and to help the average American, for which $2,500 could be a large expense, accumulate pre-tax dollars. Later came VBBD, which provides certain services, typically preventive care, at a lower out-of-pocket cost when those services are proven to show a good medical return on investment, Jacobs says.
An unintended consequence of high-deductible plans is that people, seeking to avoid out-of-pocket costs, may find reason not to use their health coverage at all, says Dodi Kelleher, a San Francisco-area independent health care consultant.
For example, a low income individual may delay or not demand services that are critical and can be cost-savings over time because a "high deductible [plan] is a pretty blunt instrument to get consumers more aware of the consequences of their demand for services," says Andrew Webber, CEO of Washington-based National Business Coalition on Health. So it became, "let's get a little more sophisticated with our incentives rather than just the blunt instrument ... and we've got some better tools to do that, we know what are the effective and ineffective services now."
Over time, the broker community began to realize that CDHPs alone were not enough, Kelleher, who previously worked as the director of health and wellness initiatives at Safeway, says. "The idea was people would act more like consumers because they have skin in the game in terms of their own money," she explains. "... It hasn't been enough and there have been unintended consequences."
"I think we have a very passive health care system from how people are expected to behave, and until recently we haven't begun to educate and inform the people who are insured on how to go about being a good health care consumer," she adds. "That's one thing that's finally changing."
Using value-based design, more attention is paid to how to alter behavior, she says. "Not just make this service cheaper ... but more broadly a whole host of services that can be value-based, [such as] healthy lifestyle and biometric testing."
For example, when Kelleher was at Safeway, premium reduction was outcome-based.
Employees and their spouses that choose to take advantage of the free testing would only qualify for the premium reduction by having health data numbers under a certain clinical threshold - results typically not found in plan members that smoked, were obese, had hypertension, high cholesterol or high fasting glucose, Kelleher says.
"If they did not qualify on a particular measure but did so the following year they could earn a retroactive credit," she adds.
Marrying CDHPS with VBBD
Bringing CDHPs and VBBD together is like owning a car, Jacobs says. When you own a car you're supposed to check your engine and change your oil to make sure it stays in top shape - it's much more cost effective than just running it into the ground and needing to replace the car outright.
When the plan designs work together, you "go for preventive exams and make sure things are the way they should be," he says. "By doing these preventive-type things, we now, in benefit design, can remove the barriers to having people do that - which is removing the co-pay.
"Some companies are going a step further by saying, 'You have to have these done and if you don't we will penalize you,'" he adds. "By removing this type of preventive care out of the co-pay, people have that barrier removed. What you can do is give them an incentive."
For an employer, they may tell employees, "Get your colonoscopy, [get your] physical and we will put $300 into your health savings account," Jacobs says.
The cost savings often also extends to prescription drugs when the plan designs are blended together. Jacobs points to low-cost generic drugs to fight diabetes, cholesterol, anxiety and depression, among other diseases.
With a generic drug, an employee might still be responsible for the co-pay of $25 for a generic or $100-plus for a brand name. But under value-based design, if a patient takes the medication appropriately by following correct dosage and getting their refills on time, the plan will give them the next refill for free.
When the conversation began on VBBD, it was about prescription drugs, but grew to encompass all preventive services, Kelleher says. At Safeway, it turned into incentives and disincentives for low-value and often costly services.
"We know if you go to your primary care doctor on a routine basis that is a better use of employer insurance, so I may agree to lower co-pay levels for going to your primary physician and higher cost [if you] go to a specialist when you don't need it," she says.
Broker's opportunity
As health care reform increasingly pushes employers to high-deductible plans, a broker can show their clients the pros and cons of a value-based design for each person affected, which includes the plan sponsor and the employee plan member.
"For the plan sponsor, if [the plan] is underwritten correctly, it saves money, it creates an incentive for members to be involved in their own health care and the administrative function can be handled just about anywhere, so it's an operationally equal playing field," Jacobs says. A broker can show their client how members under these plans "have an opportunity to teach themselves how to be a consumer in the health care world," Jacobs says.
"Most people do not know how to buy health care;" to find a doctor you usually just ask a friend, he adds. "That is definitely a weakness, which will not give you an objective viewpoint."
Cost savings
As communities nationwide continued to cut school funding, Colorado Springs School District 11 was facing health care trend increases that were unsustainable, according to a case study from the Center for Health Value Innovation. "A value-based benefit design became the strategy for us to address one of our major concerns - that every extra dollar spent on health care is a dollar that doesn't get to the classroom," Mark Cauthen, director of risk-related activities for the district said in the case study.
Using value-based benefit design, the district decided to focus on minimally invasive surgery by providing a $400 reduction for inpatient care and $250 for outpatient care. Further, Colorado Springs School District 11 provided cash incentives for employees who participated in a disease management program - $125 for enrollment and $75 for graduating.
As a result of the program, the district studied actual costs over two years and found a large reduction in lost work days due to minimally invasive procedures. That included 21.7 fewer days for gall bladder surgery, 18.9 days for colectomy, and 21.9 days for a hernia, according to data provided by the Center for Health Value Innovation. Cost savings per minimally invasive procedure ranged from $1,700 to $7,800 for a total incremental savings of $127,000.
Helping their clients
Brokers can help clients make their employees more sophisticated. "In terms of working with the plan designers, [brokers] can start to ask for more sophisticated benefit value design principles. It's not just a high deductible with a spending account, but here is a lot of information so you are a more sophisticated consumer," says the National Business Coalition on Health's Webber. "The bottom line is simply: Are brokers aware of value-based benefit designs and can they be looking at asking for those features?"
Brokers can help mitigate the fear of finding a new doctor and can provide data about who is board certified, who has had no lawsuits brought against them, etc. But for a broker to truly provide value when marrying the plans, they need to be able to educate the covered population and show the employer how to do that. Jacobs adds that there are a couple of great resources for this, such as vendors and government-sponsored tools.
"The broker can make classes available for folks and load historical claims data to show predictable medical expenses and how you can start saving," Jacobs says. "Brokers can evaluate these tools so when the employer comes to them they can have someone on staff who says, 'These tools are great but they don't have a great network.' That's how brokers can become partners with their clients."
A cost-savings example
Value-based benefit design is all about looking at the numbers and seeing actual cost reduction for employers. The Center for Health Value Innovation looked at Chippewa County, Wis., which, following value-based design principles, reduced its premium trend from 16.1% to 3% in five years, and reduced total health care costs in 2008 by half a million dollars over the 2007 budget.
Among the incentives the county offered its employees was $150 for smoking cessation health risk assessment, and diabetes education, according to a white paper from the Center.
