Harvard Study Endorses Value-Based Insurance Design

Insurers that charge higher copayments for less-useful treatments could improve care and save money, says a new study by Michael E. Chernew, PhD, a professor of health care policy at Harvard University. Chernew and colleagues propose an approach in which copayment rates are based on the value of clinical services (benefits and costs) — not just costs.

Dubbed value-based insurance design (VBID), the approach still uses a form of cost sharing, but a clinically sensitive perspective is explicitly adopted to mitigate the adverse health consequences of high out-of-pocket spending.

An example would be lowering the copayment for beta-blockers or ACE inhibitors for those members diagnosed with congestive heart failure.

This targeted approach to VBID identifies patients with select clinical diagnoses and reduces copayments only for high-value services. Another form of VBID simply targets clinically valuable services (e.g., lower copayments for all beta-blockers).

Although this might provide substantial benefit to a member with congestive heart failure, it provides less value, or no value, for members who don’t have the condition.

The researchers contend that employers and other payers who are designing health benefits should make cost-effective treatments free or low-cost for patients and charge more for less cost-effective alternative treatments. This has worked for at least one employer — Pitney Bowes — who has realized savings by adopting this approach.

“More employers and insurers will be taking this approach in the future,” says Chernew. Although traditional health insurance plans hold cost-sharing constant across treatments, relying on patients to purchase health care based on the value of each treatment, he says that”Experience shows that patients are unable to spend their health care dollars wisely.”