Value-Based Insurance Design Sparks Increased Interest

By Stephen Miller Feb 11, 2009

"Value-based insurance design" (VBID) is being embraced by a growing number of employers, especially those who self-insure, as they seek the twin goals of optimizing employee health and containing costs.

The main pillars of VBID are providing employees with greater incentives to seek out high-value health services while erecting disincentives to low-value services viewed as over-prescribed by medical professionals, explained A. Mark Fendrick, MD, professor of internal medicine and health management at the University of Michigan. Fendrick was among the keynote speakers at the 2009 Health and Human Capital Congress held on Feb. 5, 2009, near Washington, D.C.

"You want to lower the barriers for the services you want your employees to get, such as by reducing co-pays, and put in place higher barriers for low-value services," Fendrick said, adding that evidence-based medicine is increasingly providing a means for clinically assessing a medical procedure's value.

Value-based insurance designis a strategy that minimizes or eliminates out-of-pocket costs for high-value services in defined patient populations.

  • High value services are identified through evidence-based analysis.
  • The more clinically beneficial and cost-effective the therapy is for a patient group, the lower the out-of-pocket costs.

Fendrick identified tests for diabetes and colon cancer as among the diagnostic procedures employees should be encouraged to seek out. Yet often, he noted, these proven life-saving tests carry the same co-pays as unnecessary procedures ordered routinely by health providers. An extreme example of the latter could be surgery for back and neck pain, which often produces limited benefits compared to less invasive approaches but is hugely expensive.

"Efforts to reduce utilization of low-value services are more likely to help contain costs" than wellness and disease management programs, which have many positive indirect benefits in terms of employee productivity and engagement but which, Fendrick said, have been oversold as a means of curtailing employee health care costs over time.

Better Use of Data

VBID is "not paying for wasteful things," added William Bruning, president and CEO of the Mid-American Coalition on Health Care, another conference keynote presenter.

"Data is the key; employers can make significantly better use of their data," Bruning said. He urged employers to use aggregate medical data that their insurers can provide to classify risks from unhealthy lifestyles or untreated chronic conditions among their employee populations, and to design and conduct worksite interventions, and use targeted messaging, to lower barriers (which can be the result of cost or culture) to healthy choices by their employees. Benchmarking and other tools should then be used to assess the value of the interventions.

Support Networks

But "relationships will trump data," said Neil Sofian, another keynote presenter and director of behavior interventions for Resolution Health, a provider of health and wellness services. "Learning is fundamentally social; it's not just about information," he explained.

Social networking, based on common experiences and shared learning, can promote healthy behaviors such as compliance with medication for chronic disease, or adherence to a diet and exercise routine, he said. The role of a health coach should be not only to provide one-on-one counseling between the patient and a professional but also to help develop these social networks by "matching people up with each other and allowing them to create a social context through self-care micro-communities," Sofian said.

"Most of us learn through the experience of other people, through storytelling," he continued. "When information is contextually relevant, it's more likely to influence action." The task of the health coach then becomes building on the trust and support given by these communities and providing them with relevant, tailored health care information.

As an example, Sofian discussed obesity interventions in which members of a peer support community use their cell phones to send each other pictures of whatever they're about to eat, and ask for a visual assessment. Similar social circles can be formed with smokers, diabetics and those battling other chronic conditions or serious diseases.

High-tech platforms can provide channels for this social networking, using the web, e-mail, texting, Twitter and blogs, explained Joshua Rosenthal, the "products engagement guru" at Eliza Corp., a developer of health care applications. Hi-tech platforms and tools can make peer support meaningful and fun, he noted.

Sofian added that while he, too, believes that even the non-tech-savvy can learn to use these technologies, social networking can still take place via traditional means, "like the telephone."


Brian Sweet, chief pharmacy officer at Wellpoint, speaking at a breakout session during the 2009 Health and Human Capital Congress, noted that there are similarities between value-based insurance design (VBID) and consumer-directed health plans (CDHPs), such as health savings accounts (HSAs), but differences in their approaches as well. With consumer directed plans, he pointed out, "you typically have an account where enrollees have a certain number of dollars to spend and can grow their accounts over time," especially if they take steps to stay healthy (i.e., diet and exercise) and avoid unnecessary health care spending. But "with value based insurance design, you're actually utilizing incentives and rewards to directly encourage the healthy behaviors," he remarked.

How these two approaches evolve over time could shape the future direction of health care, especially to the extent that they are incorporated into national health care delivery guidelines.

What About Deductibles?

To be eligible for an HSA, an individual must be covered by an HSA-qualified high-deductible health plan (HDHP). Generally, an HDHP may not provide benefits during any year until the plan deductible is satisfied. However, an exception is allowed for preventive care benefits; these can be covered without satisfying a deductible.

In 2004, the IRS issued guidance that clarified the definition of preventive care to include drugs or medications “when taken by a person who has developed risk factors for a disease that has not yet manifested itself or not yet become clinically apparent (i.e., asymptomatic), or to prevent the reoccurrence of a disease from which a person has recovered.” The notice gave examples that include the treatment of high cholesterol with cholesterol-lowering medications (statins) to prevent heart disease, the treatment of recovered heart attack or stroke victims with Angiotensin-Converting Enzyme (ACE) inhibitors to prevent a reoccurrence, and drugs used as part of obesity weight loss and tobacco cessation programs.

Stephen Miller is an online editor/manager for SHRM.

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