The rate of healthcare inflation has outpaced general inflation over the past several years, upending the way insurance companies do business. The traditional health insurer's business model aimed to attract healthy individuals and use their premiums to subsidize healthcare costs for sick individuals. Companies could also avoid insuring people most likely to use healthcare services through adverse selection.
However, the increasing healthcare premiums placed a burden on employers and families. As a result, some in the industry are looking to value-based insurance design. Alok D. Sharan, MD, Gregory D. Schroder, MD, Michael E. West and Alexander Vaccaro, MD, penned an article titled "Value-based Insurance Design" published in Clinical Spine Surgery examining this new concept that encourages insurers to "become more active purchasers of care."
Here are seven things to know about value-based insurance design:
1. Value-based insurance design first tackles the copay and coinsurance system, requiring beneficiaries to pay more for low value care — such as lumbar fusion for back pain — and less for high value care — such as immunizations. Under the current system, members pay the same price for high and low value services.
2. The value-based insurance design would require providers and insurance companies to agree on whether services are high or low value. The appropriate use criteria developed by spine societies could inform the value of spine services, with providers adhering to AUCs receiving higher reimbursement even if patients have a lower out-of-pocket cost. However, AUC isn't comprehensive and patient-reported outcomes measures aren't applicable to all diagnoses.
3. Studies show there is an increase in service utilization when patients pay a lower portion of their healthcare bill, so insurance companies can expect members to utilize the high-value services that cost them less at a higher rate. The high value service utilization should save insurance companies over time, but that's not beneficial for those insuring the 17 percent of Americans that switch insurance companies every year.
4. Physicians are currently practicing shared decision-making in many instances, but patients may not remember the bulk of the information given to them by their physicians. Additionally, patients don't often receive cost information, so truly assessing the value of care is difficult at this time.
5. The value-based insurance design becomes more complex as patients consider their individual situations and adjust risk accordingly. The overweight patient with diabetes and other health issues will fare differently than the otherwise healthy patient seeking care for back pain even though they have the same condition.
6. There are a few examples of value-based insurance design, including one instance where Pitney Bowes lowered copayments for asthma and diabetes medications in 2001. The company saw increased utilization but saved $1 million with the program, according to the study. Overall, 13 studies on value-based insurance design showed improvement in medication adherence and lower out-of-pocket expenses but there wasn't a difference in total medical spending.
7. CMS began a demonstration program of value-based insurance design through the Medicare Advantage programs in January 2017. The study authors believe commercial insurers and employers "will attempt to use VBID as a means to pursue higher quality of care at a lower price."