Value-based plan design draws opposing views

Health and Human Services Secretary Kathleen Sebelius and Rep. Alan Grayson, D-Fla., discussed health care reform after touring a Florida clinic. PHOTO: LANDOV

WASHINGTON—A little-known provision in health reform legislation pending in the House of Representatives could give a boost to value-based insurance design principles, some employee benefit experts say.

The provision in H.R. 3200, the America's Affordable Health Choices Act of 2009, which has been passed by three House committees, would permit the use of cost-sharing incentives, such as lowering or eliminating copayments, to encourage plan members with chronic conditions to comply with drug treatment regimens or to use high-value health care screenings, such as eye exams for diabetics.

Some benefit experts say the provision, which applies specifically to the public health insurance option and to all exchange-participating health benefit plans—including employer-sponsored plans—could give employers greater flexibility in benefit plan design.

The legislation calls for establishing an insurance exchange of health plans from which individuals and businesses could choose to buy coverage. All of the participating plans would be required to offer a basic, minimum set of benefits prescribed in the bill. The bill also would set cost-sharing limits.

However, other employee benefit experts are concerned that mandating VBID principles would not only limit employer freedom over plan design, but increase costs by adding coverage requirements employer-sponsored plans must meet to be considered “qualified.”

As it is written, H.R. 3200 would set up a federal Health Benefits Advisory Committee to recommend to the Department of Health and Human Services the slate of benefits employer-sponsored health plans must offer, as well as the cost-sharing requirements the plans could impose. The HHS secretary can then accept, reject or modify the recommendations.

Although there is nothing in the bill requiring employers to amend their plans to meet the HHS standards, if they don't, the health plans might not be considered qualified, making them subject to an 8% payroll tax for each employee not enrolled in a qualified plan (BI, July 27).

Section 224(c) of the bill states: “To the extent allowed by the benefit standards applied to all Exchange-participating health benefits plans, the public health insurance option may modify cost sharing and payment rates to encourage the use of services that promote health and value.”

Dr. A. Mark Fendrick, co-director of the University of Michigan's Center for Value-Based Insurance Design, in Ann Arbor, Mich., was instrumental in getting VBID into the House health reform bill after persuading U.S. Sens. Debbie Stabenow, D-Mich., and Kay Bailey Hutchinson, R-Texas, to include it in another piece of legislation that would establish a pilot program for some Medicare recipients using VBID principles. If adopted, S. 1040 would reduce or eliminate copayments for the treatment of 15 medical conditions under selected Medicare plans (see related story). S. 1040 has been introduced and referred to the Senate Finance Committee.

The VBID concept came to the senators' attention after a staff member read an article in the January 2008 issue of the journal Health Affairs that Dr. Fendrick had written on the subject. In that article, Dr. Fendrick explained the primary objective of VBID is to remove the financial barriers to purchasing “high-value” drugs or services with the hope of raising compliance and avoiding more expensive future medical costs, such as hospitalization.

“Almost all of the discussions regarding health reform have focused on the economics,” Dr. Fendrick said in an interview with Business Insurance. “The creation of value-based insurance design acknowledges that some clinical services are more beneficial than others. If we can create a program that incentivizes individuals and health systems to do the right things, we can guarantee more health for the dollar spent.”

Incorporating VBID principles into the type of health plan employers would be required to offer might give them greater flexibility in designing health benefits, suggested Dr. Fendrick.

“Based on the conversations I have had with key staffers...the use of VBID principles is a mechanism to remain "qualified' but use alternative plan designs,” he said.

However, Helen Darling, president of the Washington-based National Business Group on Health, doubted that including VBID principles in health reform “would mean that employers would be off the hook for minimums,” referring to what minimum level of benefits and cost-sharing might be required of “qualified” employer-sponsored health benefit plans.

Employers most likely would be required to meet the minimum requirements first before overlaying VBID, which could increase plan costs, she said.

Ray Werntz, an independent benefits consultant based in Elmhurst, Ill., questioned whether it would be possible to legislate VBID, which often is based on an employer's individual demographics.

“VBID is fluid. It recognizes innovation in health care. It tends to personalize treatment. How can you write a rule that, on one hand, regulates the dynamic nature of discretion and, on the other hand, makes you feel comfortable you're protecting people against discrimination?” he asked.

“If it's more open-ended, employers would say "fine,'” said Chantel Sheaks, a principal with Buck Consultants L.L.C. in Washington. “They know their populations better than a regulatory board does. But if they start coming down and saying what specifically has to be covered, they're concerned they'll have to cover things that are not of value to them.”

In fact, another part of H.R. 3200 requires employers to waive copayments and deductibles for a host of preventive health care services, she pointed out.

Employers also are concerned about the administrative burden complying with VBID would create, Ms. Sheaks noted.

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