Value-Based Insurance Design

Value-Based Insurance Design (a.k.a. V-BID, VBID, Evidence-Based Benefit Design, or Value-Based Benefit Design) is a demand-side approach to health policy reform. V-BID generally refers to health insurers’ efforts to structure enrollee cost-sharing and other health plan design elements to encourage enrollees to consume high-value clinical services – those that have the greatest potential to positively impact enrollee health. V-BID also discourages the use of low-value clinical services – when benefits do not justify the cost. V-BID aims to increase health care quality and decrease costs by using financial incentives to promote cost efficient health care services and consumer choices. V-BID health insurance plans are designed with the tenets of 'clinical nuance' in mind. These tenets recognize that medical services differ in the amount of health produced, and the clinical benefit derived from a specific service depends on the consumer using it, as well as when and where the service is provided. Value-Based Insurance Design (a.k.a. V-BID, VBID, Evidence-Based Benefit Design, or Value-Based Benefit Design) is a demand-side approach to health policy reform. V-BID generally refers to health insurers’ efforts to structure enrollee cost-sharing and other health plan design elements to encourage enrollees to consume high-value clinical services – those that have the greatest potential to positively impact enrollee health. V-BID also discourages the use of low-value clinical services – when benefits do not justify the cost. V-BID aims to increase health care quality and decrease costs by using financial incentives to promote cost efficient health care services and consumer choices. V-BID health insurance plans are designed with the tenets of 'clinical nuance' in mind. These tenets recognize that medical services differ in the amount of health produced, and the clinical benefit derived from a specific service depends on the consumer using it, as well as when and where the service is provided. The basic V-BID premise is to align patients’ out-of-pocket costs, such as copayments and premiums, with the value of health services. By reducing barriers to high-value treatments (through lower costs to patients) and discouraging low-value treatments (through higher costs to patients), V-BID plans may achieve improved health outcomes at any level of health care expenditure. Studies have shown that when barriers are reduced, significant increases in patient compliance with recommended treatments and potential cost savings result. The concept of Value-Based Benefit Design (VBBD) arose in the 1990s. In 1993, Dr. Jack Mahoney and David Hom of Pitney Bowes pushed to move health forward in their workforce by removing barriers to access in mental health services and establishing on-site services and educational programs. The company began reducing drug copays as a means to reducing the cost barrier that is often found with medications to treat chronic conditions. In 1996, Asheville, North Carolina, began a community-based medication management program for self-insured employers to address diabetes in their workforce. The initiative elevated the role of the pharmacists and reimbursed them for the time they spent educating and counseling diabetic patients. This service required no out-of-pocket cost from the health care consumer and resulted in better health outcomes as well as direct and indirect cost savings. In the late 1990s, researchers, physicians, and economists at the University of Michigan (U-M) began studying a concept similar to VBBD, something termed 'benefit-based copay'. In 2001, the team at U-M published on the concept of benefit-based copays in The American Journal of Managed Care. The benefit-based copayment model aligned a patient's payment for a drug with how much benefit he or she derived from the medication – specifically, it placed consumers with established medical need on the lowest formulary tier. In 2004, the U-M benefit-based copay model was highlighted in an article in The Wall Street Journal. Building on their work on the benefit-based copay model, the U-M team, led by Dr. A. Mark Fendrick, MD, and Michael Chernew, PhD, coined the term 'Value-Based Insurance Design' and in 2005 founded The Center for Value-Based Insurance Design. Much like VBBD and benefit-based copays, V-BID is built on the principle of lowering or removing financial barriers to essential, high-value clinical services. V-BID aims to align patients’ out-of-pocket costs, such as copayments, with the value of services. The term 'Value-Based Insurance Design' was subsequently published for the first time in peer-reviewed literature in a 2006 article in The American Journal of Managed Care. V-BID has since been included in legislation (including the Affordable Care Act) and numerous public and private sector health plans. Value-based insurance design aims to increase health care quality and decrease costs by using financial incentives to promote cost efficient health care services and consumer choices. Health benefit plans can be designed to reduce barriers to maintaining and improving health. By covering preventive services, wellness visits and treatments such as medications to control blood pressure or diabetes at low to no cost, V-BID plans may save money by reducing future expensive medical procedures. V-BID plans may create disincentives as well, such as high cost-sharing, for health choices that may be unnecessary or repetitive, or when the same outcome can be achieved at a lower cost. To decide what procedures are the most effective and cost efficient, insurance companies may use evidence-based data to design their plans. V-BID programs lower or eliminate cost sharing for efficient and effective treatments proven to keep people healthy. This includes effective prevention and chronic care therapies, where research shows even modest cost sharing can keep people from getting care they need. Lower cost sharing improves adherence to high-value care, which can help prevent future expensive complications. V-BID programs increase cost sharing for unproven, misused or low-benefit care, like inappropriate emergency department use or imaging for low back pain. This encourages people to consider alternatives and works especially well with 'shared decision-making' tools that explain treatment option pros and cons objectively in plain language. Value-Based Insurance Design advocates that copayment rates be set based on the value of clinical services (benefits and costs)—not exclusively the costs. Recognizing that the value of an intervention varies depending on who receives it, who provides it, and where it is provided, more-efficient resource allocation can be achieved when the amount of patient cost sharing is a function of the value that the specific service provides to the specific patient.