A pillar of Connecticut’s plan to redesign the state’s healthcare system is to encourage more employers to adopt value-based insurance plans, which require companies to pony up financial incentives for workers to better manage their health.
The concept, known formally as value-based insurance design, or VBID, has become popular in recent years among large employers, including many in Connecticut, but some brokers say they doubt small firms will be receptive to the idea.
As championed by researchers at the University of Michigan, VBID aims to align patients’ out-of-pocket costs with the ultimate value and effectiveness of the medical services they receive. The idea is for employers to make treatments that result in better health outcomes more affordable to employees — through lower co-payments or deductibles — and provide financial disincentives for care that is less effective.
State government, The Hartford Financial Services Group, United Technologies Corp., and Pitney Bowes are a few Connecticut employers that have adopted VBID programs in recent years.
Now, as part of Connecticut’s efforts to curb healthcare spending and improve quality of care, state officials are hoping, and may soon push, more employers to get on board.
Benefits experts, however, remain skeptical if small businesses with fewer than 50 employees would benefit. Multiple brokers said Connecticut would likely have to adjust its laws to allow VBID use by fully insured companies.
Also, the tendency of small firms to change carriers every few years, typically in search of lower rates, makes insurers less interested in extending VBID to those companies.
“From [a small] employer’s standpoint, there’s almost no financial reason why they should pursue something like value-based benefit design,” said Bill Carew, managing principal of Farmington consultancy Ovation, a Digital Benefit Advisors company. “The way [health insurance] cost is set for small employers, it’s all based on demographics. There’s no consideration given for the relative health of the people being insured. With everything that’s going on out there in this particular space, the financial returns for these types of programs are fairly far down the list of priorities on the small business side.”
Still, Carew said, larger firms with 50 or more workers, whose claims experience plays more prominently in the insurance rate setting process, do see cost-savings opportunities with VBID.
In a 2013 survey by benefits consultant Mercer, for example, employers ranked value-based design as the third best way to reduce healthcare costs, trailing only the collective purchase of health benefits and reference-based pricing, under which employers cap what they will pay for specific clinical services.
Self-insured employers in particular find it attractive, experts say.
Real Savings
In an attempt to reduce healthcare costs, Connecticut state government implemented VBID in 2011 for its own employees and retirees. To win drug discounts and co-payment waivers under the program, workers must adhere to scheduled exams and screenings and get additional counseling if they suffer from chronic conditions like diabetes, heart disease or high blood pressure.
All but 2 percent of eligible state employees have enrolled, and of that group, 98 percent have won rewards based on program compliance, according to results published in the state’s Healthcare Innovation Plan.
Healthcare costs have been impacted: State employee’s medical costs grew only 2.2 percent in the current fiscal year, compared to a 7.6 percent increase prior to the program’s start. The state is now leading efforts to redesign Connecticut’s healthcare system, and has published its vision in a Healthcare Innovation Plan.
The plan includes input from dozens of stakeholders, such as insurers, medical providers, and employers, with the overall goal of reducing costs and improving access to quality care. Besides VBID, the plan supports “medical homes,” through which primary care physicians and others coordinate care, and “shared savings” programs that pay doctors based on the overall performance or improvement in their treatments for patients.
“One of the things that was good about the state innovation model is they’re trying to bring all the payers to the table,” said Lori Pasqualini, president of the Connecticut Business Group on Health. “The more you can get all the payers to agree … what are those value-based measurements and standards, then everybody’s talking about the same thing.”
Trend Setter
Stamford-based Pitney Bowes was among the earliest innovators of VBID via a pharmacy benefit program it created in 2006 to cut drug costs, particularly for employees with chronic conditions.
To encourage employees to keep up with prescribed medications, the company eliminated co-payments for cholesterol-lowering statin drugs and lowered co-payments for the clot inhibiting drug clopidogrel.
The shift had an impact: Employees increased their use of both drugs by 2.4 percent and 4 percent, respectively.
“When members are compliant with their medication for chronic diseases, you will avoid emergency room visits; you will potentially avoid hospitalizations as well,” said Mary Bradley, director of healthcare planning at Pitney Bowes.
Learn more about how Connecticut wants to redesign its health care delivery system
