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July 2016

Slideshow: What is VBID (Value Based Insurance Design)?

Historically, health plans have been designed in ways that treat all services and providers as delivering equal clinical value to all patients. However, the truth is that the value of care can vary a lot.

For many health conditions, there are multiple treatment options that offer very different clinical value to patients and that vary in price. In order to improve the value of our overall health care system, it is critical that health insurance is designed to promote access to high value care—that is, the care that provides the best health results for patients, at the right price.

Public and private health insurers can design health plans to promote the use of health care services and providers that offer the best health results, at the best price. Known as value-based insurance design, this approach can improve patients’ health and promote greater use of high-value care.

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    What is Value-Based Insurance Design?

    Value-based insurance design (VBID) promotes patients’ use of high-value care options by changing the cost-sharing consumers must pay for different care options.

    Under a VBID approach, treatments that provide high clinical value have reduced or no cost-sharing (out-of-pocket costs like copays), to make sure they are affordable for patients.

    In some situations, health plans may have higher cost-sharing for services that offer little or no added clinical benefit, compared to their added cost. However, this should be approached with caution and should only be considered for limited types of services (See Slide 6 for more information).

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    Why do we need to consider value when designing health insurance plans?

    While health plans are typically designed to treat all services and providers as equal in clinical value to all patients, this is not the case.

    Some treatment options are more clinically effective and less expensive than alternatives. And some providers deliver higher quality, more cost-effective care than their colleagues.

    In addition, some treatments offer greater health value to patients with certain conditions and offer significant value to our overall health care system by helping prevent more expensive medical problems in the future.

    Health insurance should be designed in a way that promotes access to high value care—care that provides the best health results for patients at the right price.

    When health plans treat all care the same, it can hinder the use of care that is important to improving patient health outcomes and controlling long-term spending in our health care system.

    For example, when plans have a high deductible that applies to all care, some patients can’t afford to use the services they need to manage chronic conditions. This can lead to more serious and expensive health care problems for them in the future that could have been prevented.

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    How does VBID encourage the use of high-value care?

    The VBID approach allows those who design health plans (insurers and policymakers) to give patients incentives to use high-value services or providers.

    Specifically, health plans using VBID could:

    1. Eliminate or reduce cost-sharing for high-value care. This is care that provides the best health results for a particular patient, at the right price. This includes evidence-based care that has been shown to improve health outcomes for patients and that can prevent future, more expensive health problems. This also could be care from high-quality, efficient providers. For example, a health plan may set no cost-sharing for medications and doctor visits necessary to control chronic conditions, like diabetes, hypertension, asthma and high cholesterol.
    2. Increase cost-sharing for low-value care. This is care that is proven not to be clinically effective or no more effective than less expensive treatments. It also could be care delivered by low-quality, inefficient providers. For example, a health plan sets higher cost-sharing for a medication that is more expensive, but no more clinically effective then another medication to treat the same condition.
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    Examples of consumer-friendly Value-Based Insurance Designs

    Here’s how a health plan designed for value would work in practice:

    1. Health plan has no cost-sharing for medications necessary to control chronic conditions, like diabetes, hypertension, asthma and high cholesterol. Helping patients get this care—which is proven to be clinically effective—without paying out-of-pocket costs can help improve health outcomes for patients with these conditions. It can prevent more serious and costly complications in the future.
    2. Health plan has no cost-sharing for doctor’s visits needed to monitor and properly manage chronic conditions. For example, the health plan does not have co-pays for diabetics to get necessary foot and eye exams or to visit their doctor to help manage their diabetes.
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    VBID must be informed by strong clinical evidence

    Value-based insurance design must be informed by strong, independent clinical research that assesses the comparative clinical benefit of different treatment options and the cost of delivering those options. This research should incorporate a definition of value that includes elements such as:

    • Value considers clinical effectiveness, not just cost: The highest value treatment option is not always the lowest-cost treatment option. If a treatment option is much more clinically effective then a less expensive option, it may still be the higher value option. For example, some treatments may have a high upfront cost but provide significant improvement in health outcomes and lower long-term costs. Alternatively, this also means that low-value care is also not necessarily the most expensive treatment option. There are inexpensive treatment options that may not provide any clinical benefit.
    • Value is not universal: The highest value treatment option can be different depending on the patient and their particular health situation. Value-based insurance design should have ways to make sure a patient can pay less in out-of-pocket costs for the treatment option that offers greatest value to their specific condition. For example, there are some conditions that have multiple medication options and the most effective medication can be different for different patients. In this case, the highest-value option can vary depending on the patient.
    • The patient perspective matters: Wherever possible, the patient’s perspective should inform the understanding of value. The health plan should be designed with a focus on clinical outcomes that matter to patients.
  • Slide 6/8
    VBID is most effective when its focus is promoting use of high-value services

    While VBID can be used to discourage the use of low-value services, we approach this application with caution.

    There are limited services that are low value and are delivered in a situation where consumers have a meaningful opportunity to be an active partner in deciding what treatment option is best.

    Because of this, VBID should primarily focus on reducing cost-sharing for high value care. Increasing cost-sharing for low-value care should only be considered for services that are pre-scheduled and non-emergent, where consumers have meaningful opportunities to compare treatment options with their provider.

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    How do we encourage greater use of VBID?

    The power to expand the use of VBID lies in the hands of insurers and state and federal policy makers.

    Insurance plans: Health insurance companies are constantly making decisions about how best to design their health insurance products. Some insurers are already incorporating value-based insurance into the plans they offer. Advocates, payers (like employers), and government officials can have discussions with insurers to encourage more of them to adopt value-based insurance design.

    Federal laws and regulations: Federal lawmakers and officials could establish laws or regulations to mandate that all or some public and private insurance plans eliminate or reduce cost-sharing for certain high-value services.

    State laws and regulations: A state could pass laws or regulations to require Medicaid and commercial health plans in the state to eliminate cost-sharing for a set of services and medications to manage chronic conditions that are deemed high value. 

    See our Advocates' Guide to Implementing VBID.

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    8 Guidelines for developing consumer-friendly VBID

    In designing and implementing VBID, policymakers and insurers should follow 8 guidelines to ensure that consumers have affordable access to the high-value care that is best for them. Insurance designs should:

    1. Rely on high-quality clinical evidence
    2. Reduce cost-sharing for high-value care, and limit use of increased cost-sharing for low-value care
    3. Have robust network of high-value providers
    4. Reward providers for delivering health care based on clinical evidence
    5. Provide resources that clearly explain value-based benefits structure
    6. Have an accessible “exceptions process” to allow consumers to get care that fits their conditions
    7. Not require consumers to participate in wellness programs
    8. Evaluate the plan’s benefit design regularly and its effect on access to care

    To learn more about each of these guidelines, see our brief, Principles of Consumer-Friendly Value-Based Insurance Design.