The fact that little has changed in the world of benefits over the last 20 or 30 years is both good and bad news. Since most plans remain generous in their coverage and funding, cost control is still a big concern, although such talk often stops well short of action. (For objective proof of this, read Brian Lindenberg’s article Benefits cost management: myth or reality?) When employers do implement cost controls, they typically shift cost to employees, regardless of individual need or ability to pay.

However, one important change is that many employers and insurers now have an interest in preventing the illnesses and injuries that drive the costs of health benefits. Employers in the U.S. have taken this mission of better health to heart, though they also struggle with innovation, strategy and implementation.

Ten years ago, Pitney Bowes took a contrarian view and significantly reduced co-pays for patients with certain conditions. Overall health plan costs dropped for most of those affected. As these findings were reported, a new American paradigm—value-based insurance design (VBID)—was born, complete with supporting organizations: the Center for Health Value Innovation (CHVI) and the Center for Value-Based Insurance Design. Could VBID work in Canada as well?

Pitney Bowes: The Granddaddy of VBIDs

Despite an anticipated cost of US$1 million, in 2002, Pitney Bowes reduced the co-insurance for some brand name drugs for asthma, diabetes and hypertension from 30% or 50% to just 10%. After two years, there were significant improvements in adherence in all three classes, though specific results were reported for diabetes products only. While pharmacy costs increased, those for drugs treating diabetes decreased by 7%. For plan members with diabetes, emergency department use dropped 26%, but hospitalization costs increased by 19%. Overall, costs for members with diabetes decreased by 6% from 2001 to 2003. Five years later, the company eliminated co-pays for statins for patients diagnosed with diabetes or vascular disease, resulting in a 2.8% increase in adherence relative to a control group.

Understanding VBID
There are many types of VBIDs, but all seek to identify and financially incent the use of high-value health services. According to Cyndy Nayer, president and CEO of the CHVI, value-based design (CHVI’s term) is a philosophy that goes beyond insurance into prevention, health decision-making and consumer engagement. The CHVI has described it as a health management tool that uses data to invest in incentives that change behaviours to reduce financial and health risk.

One point is particularly important: VBIDs are not meant to lower costs. They typically target a small number of illnesses—such as diabetes, asthma, cardiovascular disease, depression and/or smoking—for which poor treatment adherence could have serious and expensive adverse consequences. Incentives usually involve reducing or eliminating patient co-pays to lower barriers to access and solve issues of underuse, overuse and inappropriate use. Drug plans are an obvious starting point, but VBIDs typically include preferred health product or service providers, sometimes tiered according to relative value. They often require a patient to actively use disease management programs and health-promoting behaviours, such as regular blood glucose testing for type 1 diabetics.

Following presentations at four conferences in Canada, Nayer believes value-based design is relevant here. “The key question is defining the value in spending. It will be defined as better productivity, employee satisfaction and engagement—more health for the same money.” While U.S. employers have focused on pharmacy and medical benefits, she believes employers in Canada should first address absence, disability, presenteeism and performance.

VBID is likely on the rise among U.S. employers. The 2007 Mercer National Survey of Employer-sponsored Health Plans suggested that about 20% of larger U.S. employers already had VBID among their health plan options, and about 80% of very large employers were considering such a design in the next five years. A recent report from the American Academy of Actuaries noted that health plans that provide more incentives to patients to seek higher-quality and better care “can help refocus the healthcare system on value rather than on volume.”

The Canadian healthcare system—both private and public—would certainly benefit from a similar priority.

Behind every effective VBID strategy are some basic principles.

Ensure that co-pays are not barriers to good care – The RAND Health Insurance Experiment, conducted between 1971 and 1982, assessed the effect of cost-sharing on health service use, quality of care and health status in six American communities. The 2,750 families enrolled were randomly assigned to one of four fee-for-service health insurance plans with varying co-pays (nil, 25%, 50% and 95%), plus a no-cost HMO (health maintenance organization). Participants with any level of cost-sharing had fewer physician visits and 20% less hospitalization. They also used fewer drugs and dental and mental health services, mainly because they did not initiate care.

The RAND experiment showed that greater cost-sharing reduced the use of health services, both effective and ineffective—a finding that has been validated in many studies since. Higher cost-sharing has also been consistently associated with poorer adherence to drug treatment. These impacts have spillover effects on employees’ personal health status and, therefore, on productivity levels in the workplace.

Work by U.S. physician-researcher Wayne Burton and colleagues, published in 1999, added a new, previously unmeasured issue—presenteeism—to account for employees who were first described in 1955 as “here but not all there.” Most studies conclude that presenteeism is a huge organizational cost, dwarfing drugs and disability. So, if higher drug plan co-pays discourage the use of essential drugs, illnesses or injuries may be prolonged or worsen, creating more presenteeism and higher overall costs for the organization.

Shift demand to higher-value services – VBID rewards the use of high-value health services while discouraging overused or inappropriately prescribed services. When co-insurance is selectively reduced—or even eliminated—for high-value services, plan members typically use them more and are likely to be healthier and more productive as a result. The trick, then, is to distinguish and reward only the use of high-value services.

This isn’t easy. Research suggests that patients need help in distinguishing high-value from less-effective services, and so do their health providers. VBID can help with this, allowing individual consideration for access to high-cost treatments only when clinical criteria are met. For example, in three-tiered drug plans, high-cost drugs will always attract the highest co-pay, financially crippling most plan members—even if the drug effectively treats rheumatoid arthritis or cancer and allows someone to recover enough to return to work. A VBID strategy would ensure that there are reasonable limits on out-of-pocket expenses, which don’t exist in most health benefits plans outside of Quebec.

Start small – Nayer recommends that employers keep their strategy simple. What concerns people most about their health? While health certainly has many factors, her advice is to plan and implement in stages. “Value-based design is a marathon,” she says. “Teach people to run it one mailbox at a time.”

Management and communication challenges
While VBID could become the overarching philosophy for an employer, it is not meant to be the only option in the benefits tool box. VBID is not a benefits recipe; rather, it’s a set of plan principles.

Plan sponsors need to pay special attention to systems, technology and plan member communication. Without legal input and outstanding communication, privacy concerns will arise from the collection of risk factor data and the use of personal health information to determine whether or not a patient qualifies to have co-pays waived or reduced for high-cost, high-value services.

Eventually, employers and other stakeholders must face the darker side of VBID: discouraging the use of health products and services that are not cost-effective, presumably through higher co-pays. But what is a low-value health service? Generally, one that is wasteful or inappropriate. However, economics do not always stand up to the emotional challenges that accompany the funding and delivery of health services.

According to recent editions of the sanofi-aventis Healthcare Survey, employer commitment and plan member awareness, enthusiasm and participation in wellness initiatives have been uneven in Canada. U.S. employers have significantly more experience with, and commitment to, such strategies. If a broader value-based design is to work, then Canadian employers must design, deliver and better market their health promotion programs.

Success will also require employer communication that engages plan members, with the right frequency, intensity and duration. Nayer believes that health plan stakeholders “can be too clinical, medical, academic or business-like. That makes it easy for one key audience to alienate another.”

Moving to action
Despite sound principles and philosophy, there are major challenges to implementing VBID. However, VBID principles can still be adapted to reflect current knowledge and address emerging needs. Assuming that plan sponsors accept that benefits plans are on the cusp of significant change, that resources are limited and that drug plans mark a logical starting point for VBID, there is some logic in incrementally launching a VBID strategy.

What are the next steps? First, consult with plan members and labour representatives about changes in plan design so that resources and funding are allocated to those most in need. True insurance can help ensure access to effective but costly services—but likely at the expense of less-essential and lower-cost services that are affordable to most plan members today.

Second, ensure that VBID efforts link to HR goals and priorities, such as retaining a skilled and engaged workforce.

Third, collect the data from across existing health silos—such as extended health, absence, disability, workers’ compensation, employee assistance programs and engagement surveys—to help employers understand current spending and where it might be redeployed to better address underlying and unmet health needs.

The Canadian market may not yet be ready for U.S.-style VBIDs. However, the principles and evidence behind them may encourage employers here to create more sustainable health plans that improve plan member health and well-being, as well as organizational performance.

Chris Bonnett is president of H3 Consulting.

Pitney Bowes: The Granddaddy of VBIDs

Despite an anticipated cost of US$1 million, in 2002, Pitney Bowes reduced the co-insurance for some brand name drugs for asthma, diabetes and hypertension from 30% or 50% to just 10%. After two years, there were significant improvements in adherence in all three classes, though specific results were reported for diabetes products only. While pharmacy costs increased, those for drugs treating diabetes decreased by 7%. For plan members with diabetes, emergency department use dropped 26%, but hospitalization costs increased by 19%. Overall, costs for members with diabetes decreased by 6% from 2001 to 2003. Five years later, the company eliminated co-pays for statins for patients diagnosed with diabetes or vascular disease, resulting in a 2.8% increase in adherence relative to a control group.

Get a PDF of this article, and other coverage from the Healthy Outcomes Conference.

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Copyright © 2019 Transcontinental Media G.P. This article first appeared in Benefits Canada.

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