Did you know that the US spends more on healthcare than any other country? And of that spending, almost 30% could be considered waste.
Employers and advisors have always been looking for ways to reduce healthcare spend, but in today’s environment of wildly out of control spending, it’s more important than ever to enhance health benefits without breaking the bank. One way they’re doing this is through value-based benefit design.
In this blog post, we’ll talk about what value-based benefit design is, including the advantages to an employer and their workforce. We’ll also share four strategies that self-insured employers can use to improve employee health while minding the bottom line.
What is Value-Based Benefit Design?
According to the National Conference of State Legislatures, value-based benefit design “aims to increase healthcare quality and decrease costs by using financial incentives to promote cost-efficient healthcare services and consumer choices.” When you take a value-based approach to benefit design, you’re looking to get the best outcomes for the money spent.
Health care value can be ranked from low to high.
Low-value services are not as clinically effective as other services and/or they don’t produce a positive ROI. This includes immediately prescribing opioids for back pain rather than trying other things like physical therapy first. It could also include things like prescribing antibiotics for upper respiratory infections, when the vast majority are caused by viruses (which aren’t affected by antibiotics). Another example would be ordering a CT scan for someone with simple dizziness, or an EEG for headaches.
According to a recent RAND Corporation study, about 1 in every 1,000 antibiotic prescriptions is associated with complications that require people to go to the ER. It estimates that $12.8 billion to $28.6 billion could be saved each year if measures were taken to reduce low-value care.
Low-value care is a waste in our healthcare system. And it results in higher costs for employees and their employers. It’s also associated with poor health outcomes.
High-value services demonstrate great clinical effectiveness and cost is proportionate to results. Some examples of this include preventive care like cancer screenings, health risk assessments, and vaccinations. It could also include only testing and prescribing medications when clinically necessary.
High-value care also includes chronic condition management and support, like support programs for people living with diabetes or heart disease.
Ultimately, a value-based benefit design encourages the use of high-value care and discourages the use of low-value care.
Why is Value-Based Benefit Design Worth Considering?
There are several benefits to employers and their employees.
When you eliminate or reduce cost-sharing for high-value services, employees are more likely to access the right level of care. They will avoid expensive and unnecessary low-value services that are not likely to improve their health. This saves money for both themselves and their employers.
Improve Employee Health
Utilizing a value-based approach, you encourage care that has been clinically proven to improve health outcomes. For example, you can help employees quit smoking by sponsoring a free or low-cost cessation program. This cost is much lower than the cost of treating lung cancer or heart disease.
Leveraging cost-sharing models that incentivize employees to access high-value care demonstrates the employer has their best interests in mind. This results in higher employee satisfaction and loyalty.
Strategies to Consider
Self-insured employers are in a unique position to be able to implement benefit design strategies that value care quality. Let’s look at some strategies top employers are successfully using.
To steer employees from receiving low-value care, consider incentivizing high-value service.
Not all incentives are equal for all employees. In some companies where most employees make six-figures, things like lower copayments may not make a difference to them. But perhaps they’ll respond to higher HRA or HSA employer contributions. On the other hand, lower income employees are likely to view lower copayments and lower drug costs as very positive.
Some other incentives to consider include:
- Bonuses for using recommended services
- Rewards for meeting certain goals or targets
- Rewards for meeting goals by those with particular medical conditions (diabetes, etc.)
- Reduced premium for using recommended services
Work with TPAs, carriers, and PBMs to address low-value care.
When it comes to value-based benefit design, it’s important to work with your TPAs, health plans, PBMs and other stakeholders.
Take advantage of utilization and other data given to you by partners to take a close look at low-value care usage. Work with your partners to determine the risks, costs, and rewards for tackling those that are costing the most money.
Collaborate to identify high-cost conditions/high-cost claimants and then focus on early identification, engagement, and guidance toward the right care at the right time.
The Research Consortium for Healthcare Value Assessment has a great tool that you can use to understand low value care usage.
You should also find out what your partners are already doing to address low-value care. At renewal time, or when contracting with a new TPA, negotiate policies that help employee avoid low-value care. Perhaps you look at health plan changes like:
- Bundled services with providers for one price
- Reference-based pricing
- Value-based high-deductible plan
- Pay bonuses or impose penalties based on low/high-value care usage
Offer low-cost or free preventive care.
A value-based benefit design relies heavily on free or low-cost preventive care. This means incorporating things like early interventions, proactive wellbeing programs, chronic condition identification, health screenings, vaccination clinics, and more into your plan design.
In fact, the National Commission on Prevention Priorities released a list in 2017 of 28 high-value services with strong evidence of effectiveness, impact, and cost-effectiveness. All of these were what would be considered preventive care.
This is important for a couple of reasons. First, when you remove the cost barrier, people are more likely to participate. Second, preventive care is high-value care. High value care saves money and produces the greatest outcomes.
Address chronic conditions like diabetes and heart disease.
It should come as no surprise that 90% of our $3.8 trillion in annual healthcare spend is for people with chronic conditions. A value-based benefits design can help avoid some of these costs.
Offer a low or no-cost support program to those living with or who are at risk of a chronic disease. This will help them better address their medical problems in a smarter, clinically better, and more cost efficient way.
One of the greatest barriers to successful treatment for diabetes is the cost of medications. Consider reducing or eliminating prescription drug costs for employees with chronic diseases. This will ensure that they are compliant with their medications and avoid the risk of more acute (and more costly) medical problems.
Consider an integrated health solution.
Another value-based benefit strategy is to implement an integrated health management solution. It’s a perfect complement to the other strategies shown above. In fact, it can serve as a wraparound option that ensures employees get the care they should.
These solutions utilize a team of virtual care, navigation, medical advocacy, health, and other experts who steer employees to the most appropriate, high-value care. They empower employees to engage in their own healthcare decision-making in a smarter way. Employees are educated and supported by clinical advisors who have the expertise to know what will work best for them.
An important component of integrated health is virtual care. Virtual care is considered high-value care because it is typically free to employees, is very easy to access, and have great impacts on health outcomes.
When we look at the future of employee benefits, it’s clear that value-based plan designs are here to stay. They benefit both employers and their teams through better cost savings and enhanced health outcomes.
If you’d like to learn more about how SentryHealth can complement your value-based benefit design with its integrated health solution, let us know. We’d love to collaborate!