Health Insurance :: Get more value out of your health insurance plan

American employers and citizens could get a lot more value out of their health insurance by abandoning the old-fashioned system of charging everyone the same, says a team of University of Michigan and Harvard University researchers.

Like a one-size-fits-all shirt that doesn’t fit anyone very well, American health insurance plans charge every person the same out of pocket cost for medical services ? regardless of their effect on a person’s health. So, whether your visit to the doctor is for life-threatening cancer, or just the common cold or a sprained ankle, you’ll pay the same co-pay or deductible. These cash costs set by your employer and your insurance plan are designed to keep you from using “too much” health care.

But what if those out-of-pocket costs are high enough to keep your co-worker from taking a medicine that could greatly reduce her risk of having a heart attack, or to keep her from refilling a prescription that could prevent her child’s asthma attacks?

American employers ? and citizens ? could get a lot more value out of their health insurance by abandoning the old-fashioned system of charging everyone the same, says a team of University of Michigan and Harvard University researchers in a new paper published online today in the journal Health Affairs.

Instead, companies should tailor their plans so that people who can get the most benefit out of a particular drug or screening test will actually pay the least for it. By doing so, companies might not only get more for their money, they might even save money in the long run by helping their employees prevent expensive health crises.

This approach, called value based insurance design or VBID, was first described by U-M professor of internal medicine and public health A. Mark Fendrick, M.D., and former U-M public health professor Michael Chernew, Ph.D., now a health care policy professor at Harvard. Together, they formed the U-M Center for Value Based Insurance Design.

Under their approach, a person with diabetes would pay little for drugs that can delay diabetes-related health problems, and for eye and blood tests that can spot those problems early. And employees in their 50s might get free or low-cost colonoscopies, to spot pre-cancerous polyps and treat them before they become cancer.

“”It makes absolutely no sense to have the all patients pay the same for medical services that may have enormously different health effects. Costs should be lowest for those for whom the evidence of benefit is strongest ? and vice versa, with higher costs for services where the proof of benefit isn’t strong,” says Fendrick.

In their new paper, he, Chernew and U-M colleague Allison Rosen, M.D., Sc.D., describe the principle more in depth, and give examples of where it is being used.

One prominent example is the University of Michigan, where 2,200 diabetic employees and dependents are receiving free or reduced-cost medications and tests as part of a pilot project headed by Rosen, who directs the VBID center’s clinical core.

Called MHealthy: Focus on Diabetes, the program is unique because it was designed to test the VBID principle rigorously ? including its ability to encourage patients who aren’t yet taking beneficial medications to start taking them and to stick with them. For instance, people with diabetes are known to receive great benefit from taking inexpensive blood pressure drugs called ACE inhibitors ? but most of them aren’t using the medications. The U-M project is looking at whether “free” availability of select medications will help encourage their appropriate use.

Other examples cited in the new paper include the Pitney Bowes Corporation, which has reported saving money by lowering co-pays for asthma and diabetes medicines across the board, and the city of Asheville, NC, which showed increased adherence to recommended diabetes medications and tests, and decreased sick leave and health costs, after reduced co-pays and other programs were put in place for employees with diabetes. Neither of these projects is being evaluated as thoroughly as the U-M program, but both illustrate the potential of the VBID approach.

The authors acknowledge challenges to implementing VBID, including the initial short term increase in cost that would result from increased utilization of medications and tests by appropriate patients, and the lack of research on many health issues that would steer the tailoring of insurance plans to reduce costs for those who stand to benefit most from any one test or treatment.

And of course, companies would have to be careful to protect the privacy of employees who have the particular medical conditions or risk factors that would make them eligible for tailored co-pays and benefits.

In the end, though, the authors argue that these issues can be surmounted, and that the VBID approach will lead to better health and perhaps cost savings in the long term.

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