Insurance News

Group Health testing insurance incentives in effort to cut health-care costs

Posted on: August 26, 2010

Group Health Research Institute has received a $2 million federal grant to study whether a relatively new health-insurance model can support and improve patient health, and hence can reduce cost.

If it does, many insurers and self-insured employers may well adopt this model, which uses financial carrots and sticks to nudge patients to use health care of proven benefit and to make them think twice before spending money on medical services that could be unnecessary.

Called “value-based insurance design,” this evolving model employs financial incentives — lower deductibles, co-payments and coinsurance — to encourage patients to take advantage of health services that medical research shows will support and improve their health, such as preventive care, wellness programs and disease management.

And it uses financial disincentives, such as higher deductibles and co-payments, to discourage them from using services that possibly are of less value to their well-being, such as high-tech radiology, knee replacements, breast reduction and heart stents.

“It’s too early to say, but it may change the way that consumers pay for health care, making them more sensitive to the value of the health services they choose to use,” said Dr. David Grossman, a medical director at Group Health Cooperative.

Mary McWilliams, CEO of the nonprofit Puget Sound Health Alliance, said value-based insurance is based on “evidence about what works to design health benefits,” and its financial incentives help patients make good health care choices. (The nonprofit alliance comprises some 150 businesses and public-sector members.)

Conventional health insurance, by contrast, charges the same out-of-pocket costs for medical services other than preventive care, regardless of their value established by research. Full coverage of preventive care, with no cost-sharing, is one element of value-based design.

If value-based insurance products prove effective, it seems likely that health insurers and self-insured employers could flock to this model, since it would reduce medical claims and therefore premiums.

“They will adopt this if our study and others show that the model is really effective,” Grossman said.

What’s more, this design could dramatically affect how patients spend their money. Overall, it could slow the rate of rising medical costs.

“It may also hold promise for helping to bend (downward) the health care cost trend that American employers have been facing,” Grossman said.

Meanwhile, five health insurers in Oregon recently fashioned a value-based product. “All five plans have committed to the new product,” said Jack Friedman, CEO of Providence Health Plan, in Portland.

Dr. Joe Gifford, senior medical director at Regence BlueShield, in Seattle, said Regence will watch to see how well the value-based products work in Oregon and then decide whether to market one of its own in Washington. Among the Oregon insurers adopting the value-based model is Portland-based Regence, which owns Regence BlueShield.

“We think it’s a great idea,” Gifford said.

In Seattle, Group Health Research Institute is setting about examining the effectiveness of value-based insurance.

Grossman is leading a multidisciplinary team that during the next four years will compare the value-based design, Total Health, that Group Health Cooperative adopted for its 9,000 employees with a Colorado control group with standard insurance coverage.

“The big question is, does this save money in the long term?” Grossman said. Does it improve employee health and productivity and satisfaction and quality of life?

“Ultimately, the benefit we are seeking is to improve the health of employees as the best way to avoid costs associated with obesity, depression, lower back pain, cardiovascular conditions and so on,” he said. “By scientifically tracking Total Health, we are trying to discover what will really work to accomplish this.”

The savings may come in the form of health care costs, but they may also show up in improved health and productivity of the work force, Grossman said. “That remains to be seen.”

Group Health Research Institute received its $2 million research grant, a few weeks ago, from the federal Agency for Health Research and Quality. Grossman said he believes Group Health is unique: “I’m not aware of other federal grants on this topic.”

Value-based insurance design may help employers control health care costs.

“Employers care about the health of their workers and also have an interest in making sure that illness and disability do not threaten the productivity of the work force,” Grossman said.

By employing financial incentives to promote the use of high-value health services, and disincentives to decrease the use of low-value services, he said, “employers and health (insurance) plans can increase the net value of the health dollar spent.”

Grossman said Total Health includes such elements as no-charge preventive care, including immunizations and cancer screenings; free or low-charge chemical-dependency treatment, weight management programs and the like; improved care for employees suffering chronic health conditions, such as diabetes, to control the risk of complications; and an employee wellness program.

As an incentive, Group Health rewards employees partaking in the wellness program with $400 for the first year and annual increases thereafter.

To give its own, in-house wellness program a boost, Group Health recently hired the services of Bellevue-based Limeade, an online wellness company.

What medical services are deemed of lesser value and will cost Group Health employees more out of pocket? High-end imaging, emergency services, outpatient surgery and brand-name prescription drugs.

Oregon insurers have a much longer list. Insurers there participated in a group called the Health Leadership Task Force to devise a value-based insurance plan that the group has urged insurers to implement.

Gifford, of Regence, said the group identified discretionary medical services that should demand more cost-sharing by patients, including surgery for stomach reflux, upper gastrointestinal endoscopy, arthroscopic knee and shoulder surgery and all high-tech imaging.

Also included are spine surgery, hip and knee replacements, heart surgery, nose surgery, noncancerous hysterectomy and hospital emergency room visits.

Each insurer will decide for itself what to include and how much out-of-pocket costs patients should bear.

“There are a lot of experiments going on,” Gifford said.

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