Value-based insurance design (VBID), conceived by a multi-disciplinary faculty team at the university of Michigan, works on the premise of aligning patients' out-of-pocket costs with the value of health services. As applied to benefit plan design, VBID recognizes that different health services have different levels of value.
Mark Fendrick, MD (pictured at right), co-director of the university of Michigan's Center for Value-Based Insurance Design (www.vbidcenter.org), explained: "We're moving from one-size-fits-all benefit design to one that is clinically nuanced and encourages the use of high-value clinical services and, if necessary, discourages those services of no, marginal, or unproven benefit."
Fendrick said VBID has had substantial success in the self-insured -- the large employer -- payer community, in which organizations have substantial control over their benefit design. He added, "We are now making great strides to create VBID products for the fully insured book of business as the employers, the ultimate payers of care, are looking for more evidence that the increasing spending they are incurring on healthcare is yielding increased health, as opposed to falling prey to an inefficient incentive system."
According to the VBID Center, the concept began receiving national attention in 2004 when the Wall Street Journal reported that Fortune 500 employer Pitney Bowes saved $1 million from reduced complications after lowering co- payments for asthma and diabetes medications. Since then, numerous private and public employers, including the city of Springfield, Ore.; the Marriott Corporation; the Midwest Group on Health; Florida Power and Light; Service Employees International Union; UnitedHealth Care; the State of Maine; and the University of Michigan have implemented VBID approaches.
It's worth noting that VBID has also made strides in the state and federal policy arena. It's referenced in the Affordable Care Act, the National Quality Strategy and President Barack Obama's deficit-reduction plan.
So how does it work in practical terms?
"The majority of VBID efforts are structured to create positive incentives for the right behaviors -- reduction or elimination of co-pays for taking the appropriate drugs or for getting necessary preventive health screenings," said Jeff Rideout, MD, senior vice president for cost and care management and chief medical officer for the TriZetto Group, a healthcare IT company active in the VBID market. "One of the challenges is making that specific to individuals or a group of individuals."
For example, consider an employer group with a benefit structure encouraging wellness. "Can the system essentially identify that employer group so it can isolate that group and do what that group wants -- as opposed to every customer in the plan's continuum of customers?" Rideout asked. "Also, can you incent not just subscribers, but individual members? Most organizations track at the subscriber level with dependents under that. You want to make sure that you can customize your incentives for the mom, the dad, and the kids, if that's appropriate. These technical challenges represent the next horizon for VBID: Can you customize them enough to be appropriate for target audiences, whether that's positive or negative?"
"VBID is one way to take advantage of the emerging health IT infrastructure to get health systems, clinicians and patients to do more of the things we should be doing and, in some situations, less of the things we shouldn't be doing," Fendrick concluded.