Strategies for Health Insurance Exchanges to Promote Value-Based Insurance Design
About $25 billion in federal funding will flow through state health insurance exchanges in 2014, providing coverage for 9 million Americans.1 State-run exchanges can get more health for these
dollars by promoting value-based insurance design (V-BID) principles in the health plans sold on the exchange. V-BID programs lower financial barriers to specific preventive services, diagnostic tests, treatments, and providers demonstrated to be of high value across the entire continuum of clinical care. Ultimately, V-BID can drive increased use of high-value, cost effective care and decreased use of low-value, cost ineffective care. Section 1311 of the Patient Protection and Affordable Care Act (ACA) and the final exchange rule (45 C.F.R. § 155-157) set out parameters for how exchanges will operate. Yet states have flexibility within these parameters. Below are five policy options for the use of V-BID in exchanges. The options are listed beginning with the most aggressive V-BID promotion strategies. The approaches are not mutually exclusive; portions of each may be combined.
1: Require that plans in the exchange include V-BID elements
The ACA requires all new plans to cover certain preventive services without out-of-pocket cost-sharing. This includes routine immunizations and services that the U.S. Preventive Services Task Force has rated as “A” or “B.”2 This means that all plans sold on the exchange will include some important V-BID elements. However there are many other evidence-based V-BID features that exchanges (especially those functioning as “active purchasers”3) might require all qualified health plans to deploy. For example, exchanges could require plans to cut copayments for cholesterol control medication for at-risk individuals or lower financial barriers to guideline-recommended services such as hemoglobin A1c testing and eye examinations for individuals with diabetes.
Mitigating the potential for adverse selection is a key advantage of requiring V-BID. Without requirements for V-BID, exchanges may encounter carriers that are hesitant to incorporate V-BID (especially incentives) out of fear that their plans will disproportionately attract high-need individuals. Adverse selection is a concern since a substantial majority of V-BID programs reduce cost-sharing for evidence-based services for high-cost chronic diseases such as heart disease, diabetes, and depression. As cost-savings may take years to accrue and consumers often move between plans, insurers may also be reluctant to offer designs that will likely increase spending in the short-term while potentially benefiting competitors in the long-term.
Exchanges can proactively address this dilemma by requiring all qualified health plans to incorporate specific evidence-based V-BID features that are unquestioned in their clinical benefit and have evidence demonstrating cost savings, cost neutrality, or cost effectiveness.4
2: Allow benefit design flexibility for plans incorporating V-BID, and ensure adequate risk adjustment
One potential undesirable outcome of standardized benefit packages is the stifling of innovation, such as clinically nuanced value-based designs that promote efficiency and better health. For instance, a plan waiving cost-sharing for medications that prevent asthma exacerbations or seizures might fail to meet requirements for standard copayment levels. Likewise, a plan varying cost-sharing for high-value clinician visits, laboratory testing, or imaging services might also run afoul of standardization rules. Even if designed with care, cost-sharing standardization requirements are unlikely to keep pace with advances in clinical evidence.
Exchanges can strike a middle ground between flexibility and standardization by allowing carriers to offer V-BID plans alongside required standard plans. As a condition of offering a V-BID plan, exchanges might require issuers to present evidence that the proposed V-BID provisions are clinically nuanced and grounded in research. The exchange could also develop a list of “pre-approved” V-BID options.
California’s exchange staff recommends this approach, offering carriers the flexibility to reduce cost-sharing for certain services in special V-BID plans.7 The V-BID Center recommends that exchanges allow health plans to impose incentives and disincentives in V-BID plans. Higher cost-sharing for harmful services and services of uncertain benefit can discourage the use of unnecessary care. Disincentives for certain services can also help produce V-BID plans that are cost saving.8
When V-BID is optional for plans on the exchange—as it will likely be in California—effective diagnosis-based risk adjustment programs will be particularly important to mitigate adverse selection concerns.9 Under the ACA, risk adjustment will apply to all nongrandfathered plans in the individual and small group markets. The federal government will develop a risk adjustment model and make it available for state use. In 2014, states will have the option to deploy this model, deploy an approved alternative, or leave risk adjustment to the federal government. Policymakers should carefully develop, monitor, and refine their risk adjustment programs to ensure the viability of voluntary V-BID.
3: Allow or encourage carriers to market V-BID plans to consumers with specific conditions
Exchanges might permit health plan designs that are targeted and marketed to people with specific conditions—such as asthma, diabetes, or mental illness—to compete on the exchange. These plans could be structured to include focused V-BID plan components that are specific to the targeted condition. For example, in certain markets United offers a plan designed for patients with diabetes.10 Again, risk adjustment may be important to ensure the viability of these plans if offered on the exchange.
4: Highlight and promote V-BID plans when consumers search
Overwhelming choice may lead to suboptimal plan selection,5 and consumers searching for coverage on the exchange might find dozens of options from which to choose. Accordingly, exchanges must carefully consider how they will communicate and display coverage options. Consumers are heavily influenced by presentation, and research shows that defaults are critically important.11
In determining an exchange’s choice architecture—that is, how it will present options to consumers—exchanges can highlight plans’ use of V-BID. Under this approach, a plan that features extensive use of V-BID might be displayed more prominently than a plan that contains few V-BID elements. Exchanges could also use symbols to denote V-BID plans, much as they might use other symbols to denote plans with limited networks or other features.
5. Recognize V-BID designs in quality ratings
The law requires all exchanges to rate carriers’ efforts to promote quality. Quality ratings, as determined by the exchange, may consider V-BID designs insofar as they encourage patients to use evidence-based, high-value services. State exchanges can recognize the impact of value-based designs by assigning higher ratings to plans that include V-BID features. This may be particularly valuable when plan-specific data on health outcomes is unavailable.
Large purchasers are embracing V-BID in ever-growing numbers in light of its proven benefits in health and cost.12 However, there is no guarantee that clinically nuanced V-BID plans—plans that deliver more health for the money—will be available to consumers on the exchange. Ensuring the availability of V-BID for all consumers will require focused strategies and the thoughtful leadership from decision-makers in states, the federal government, and the private sector. While exchange leaders must balance many competing priorities, the opportunities to promote high-value health care through V-BID merit attention, consideration, and action.
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The University of Michigan Center for Value-Based Insurance Design leads in research, development, and advocacy for innovative health benefit plans. Established in 2005, the Center works as a liaison between the research community and implementers— employers, plan designers, and policy makers to help synthesize and communicate research findings, and encourage the benefits of V-BID. Please contact the V-BID Center at (734) 615-9635 and through www.vbidcenter.org.
1. Congressional Budget Office. Estimates For The Insurance Coverage Provisions Of The Affordable Care Act Updated For The Recent Supreme Court Decision. CBO, 2012. Accessed at: http://www.cbo.gov/sites/default/files/cbofiles/attachments/43472-07-24-2012-CoverageEstimates.pdf.
2. U.S. Department of Health & Human Services. Preventive Services Covered Under the Affordable Care Act. DHHS, 2012. Accessed at: http://www.healthcare.gov/news/factsheets/2010/07/preventive-services-list.html.
3. Schwartz S. Six States Give Green Light To Active Purchasing In The Exchange. National Academy for State Health Policy, 2012.
4. Risk adjustment programs can mitigate adverse selection concerns that may arise when exchanges impose V-BID requirements that do not apply outside the exchange.
5. Zhou C, Zhang Y. The Vast Majority Of Medicare Part D Beneficiaries Still Don’t Choose The Cheapest Plans That Meet Their Medication Needs. Health Affairs, 2012;31(10):2259–65. Accessed at: http://content.healthaffairs.org/content/31/10/2259.full.pdf.
6. Urff JE. Determining Health Benefit Designs To Be Offered on a State Health Insurance Exchange. Blue Cross Blue Shield of Massachusetts Foundation, 2011. Accessed at: http://bluecrossmafoundation.org/sites/default/files/Lessons%20for%20National%20Reform%20from%20the%20Massachusetts%20Experience%20Benefit%20Designs%20Toolkit%20v2.pdf.
7. California Health Benefit Exchange. Qualified Health Plan Policies And Strategies To Improve Care, Prevention And Affordability: Discussion Draft – Options And Recommendations.California Health Benefit Exchange, 2012. Accessed at: http://vbidcenter.org/wp-content/uploads/2014/12/CA-HBEX2012.pdf.
8. Fendrick AM, Smith DG, Chernew ME. Applying Value-Based Insurance Design To Low-Value Health Services. Health Affairs, 2010;29(11):2017–21. Accessed at: http://content.healthaffairs.org/content/29/11/2017.full.
9. Weiner JP, et al. Adjusting For Risk Selection In State Health Insurance Exchanges Will Be Critically Important And Feasible, But Not Easy. Health Affairs, 2012;31(2):306–15. Accessed at: http://content.healthaffairs.org/content/31/2/306.full.
10. United Healthcare. Diabetes Health Plan. United Healthcare, 2012. Accessed at: https://www.uhc.com/health-and-wellness/health-topics/diabetes/managing-diabetes.
11. Kleimann Communication Group, Consumers Union. Choice Architecture: Design Decisions That Affect Consumers’ Health Plan Choices. Consumers Union, 2012. http://www.consumersunion.org/pdf/Choice_Architecture_Report.pdf.
12. Choudhry NK, Rosenthal MB, Milstein A. Assessing The Evidence For Value-Based Insurance Design. Health Affairs, 2010;29(11):1988–94. Accessed at: http://content.healthaffairs.org/content/29/11/1988.full.