Connecticut’s Embrace of Value-Based Insurance Design: Lessons for Health Reform

Guest bloggers Mark Fendrick and Jason Buxbaum are with the University of Michigan Center for Value-Based Insurance Design.
State health insurance exchanges and Medicaid programs eager to promote health and efficiency have a new tool in the toolbox.  Value-based insurance design (V-BID)—hailed as a “game changer” by the National Coalition on Health Care—refers to insurance designs that vary consumer cost-sharing to distinguish between high-value and low-value health care services and providers.  The basic premise of V-BID is to align consumer incentives with value by reducing barriers to high-value health services and providers (“carrots”) and discouraging the use of low-value health services and providers (“sticks”). When carrots are coupled with sticks in a clinically nuanced manner, V-BID improves health care quality and controls spending growth.
States have many opportunities to promote, facilitate, and incorporate V-BID in health reform.  Three of these opportunities stand out.  First, states can establish ground-rules for qualified health plan (QHP) participation in the exchange enabling V-BID.  This means thinking critically about plan design, marketing, and quality rating strategies.  Second, many Medicaid programs will be growing in 2014, and new rules may make it easier to deploy V-BID principles to deliver better care to more enrollees.  Third, states can and are leveraging generous federal state innovation model (SIM) funding to spread V-BID among public and private payers.
The State of Connecticut’s successful experience with V-BID in its state employee health plan is instructive in these regards, and early results suggest that promoting, facilitating, and incorporating V-BID should be a priority for state health policymakers.  Driven to act by a projected budget gap of $3.8 billion in fiscal year 2012, Connecticut state employees, the Governor’s Office, and the Office of the State Comptroller jointly identified health care costs as a key opportunity for long-term savings.  Discussions led to the October 2011 launch of an uncommonly innovative initiative intended to improve health and enhance efficiency—the Health Enhancement Program (HEP).
The Ask of HEP Enrollees
HEP rewards state employees, select retirees, and dependents who commit to a number of responsibilities. The “ask” of enrollees includes:

• Undergoing specified age- and gender-appropriate health risk assessments, evidence-based screenings, and physical and vision examinations; and
• Participating in condition-appropriate chronic disease management services.

HEP enrollees with diabetes, high cholesterol, high blood pressure, heart disease, asthma, and COPD are required to obtain specific evidence-based services. (Enrollees with unusual circumstances are exempted as appropriate.)  Beneficiaries may be disenrolled from HEP if they disregard these expectations.
The Incentives
HEP enrollees pay less for health care than those who do not elect to participate. Specifically, HEP offers enrollees:

• Exemption from an insurance premium surcharge imposed on non-enrollees (savings of $100/month);
• Exemption from the deductible (potential annual savings of up to $1,400/family);
• Reduction or elimination of copayments for chronic disease management medications;
• Elimination of copayments for office visits for chronic conditions; and
• Incentive payments of $100 annually if a member, or member’s dependent, with a targeted chronic condition complies with all HEP requirements in the year.

The Results

• Participants Respond to Incentives and Accept Accountability.  About 98 percent of the approximately 54,000 eligible Connecticut state employees and retirees have enrolled in HEP. These individuals have overwhelmingly complied with HEP requirements: after 15 months of follow-up, Connecticut estimates that 99 percent have met expectations.
• Clinically Nuanced Incentives Increase Evidenced-Based Care and May Promote Favorable Changes in Utilization. According to the Connecticut State Comptroller, monthly primary care visits have increased, while emergency department and specialist visits have decreased.  (See figures.)  Adherence to heart disease, blood pressure, cholesterol, and diabetes medication has modestly improved since HEP’s launch.
• Increases in Health Care Spending May Be Slowing. The medical-spending trend for HEP enrollees decreased from +13 percent in fiscal year 2011 to +3.8 percent in fiscal year 2012. A formal evaluation funded by the Robert Wood Johnson Foundation is now underway and will provide more conclusive information on HEP’s impact on spending.

Early Lessons Learned and Implications for States

• States and State Employees Can Collaboratively Design and Implement Innovative “Win-Win” Plans, Even Under Difficult Circumstances. Connecticut is not the only state wrestling with health care spending for state employees and their dependents.  As other states consider options for improving health and bending the long-term trend, the Connecticut experience may be instructive.  With the right leadership, vested parties can overcome inertia and rethink benefit design for state employees and retirees.  Federal funding through the SIM initiative may be available to support these efforts—funding that multiple states are already leveraging.
• Smart Plan Designs in Health Insurance Exchanges Can Promote Better Health.  The Connecticut experience demonstrates that consumers will commit to health-promoting activities when appropriately incented.  Yet there is no guarantee that health-promoting V-BID plans will be available to consumers seeking coverage on the exchange.  States have anumber of policy levers for promoting V-BID in their health insurance exchanges, and these options merit consideration.
• Newly Expanded Medicaid Programs May Deploy V-BID to Promote Health, Efficiency, and Accountability.  Concretely, this might mean imposing higher copayments on low-value medications and services, but ensuring that high-value drugs and services (e.g., inhalers for asthmatics, retinal exams for diabetics) remain accessible without copayments that can decrease adherence and increase acute care utilization.  A proposed rule from CMSmay allow states to impose higher cost-sharing on certain Medicaid beneficiaries for non-preferred drugs, outpatient services, and non-emergent use of the emergency department. States should embrace this flexibility to strategically impose cost-sharing based on clinical value—not just price.

How does V-BID figure into your state’s health reform strategy?  Please share your plans in a comment below.
This post is adapted from an issue brief, “V-BID in Action: A Profile of Connecticut’s Health Enhancement Program,” released by the University of Michigan V-BID Center with support from the Robert Wood Johnson Foundation’s State Health Access Reform Evaluation program.