Employer considerations before adopting a value-based health plan

The promise of value-based care is to deliver the best outcomes at a lower cost. Providers are incentivized to keep members healthy by proactively managing the health needs of the members, delivering high quality care while reducing the use of unnecessary tests and treatment.

Self-funded employers have a lot to gain from this model in higher quality, better experience and outcomes and reduced costs. However, it requires a shift in their thinking from the way benefits are designed and delivered today.

We think the effective implementation of value-based care for self-funded employers would require at least three considerations-

  • Value-Based Plan Design
  • Value-Based Network Design
  • Value-Based Care Delivery

Value-Based Plan Design

Unlike traditional plan design approaches, value-based plan design should be focused creating member experiences which encourage them to utilize high value services that produce better outcomes.

Benefit-AnalysisIt is important to carefully deliberate the implications of such design to ensure you have the systems and resources necessary to fully implement the design and your design fits within the culture of your organization.

Benefit administrators should also be cautious about how they communicate the value proposition of this model, if not done well, it may look like a restrictive narrow network.

They can integrate financial incentives such as lower premiums, lower copay, cash or gift cards, and focus on communicating the value proposition such as unique experience, plan of care, coordinated care etc. to encourage employees to use the system to achieve the desired results.

Value-Based Network Design

Employers can explore value-based care products through a health plan or a direct contract with a health system in an area where they have a large geographic footprint.. Either way, while designing networks, have an open discussion about how the providers can leverage what they’re already doing to deliver an improved experience for the employees.

network designWhile there are several models which they can use for contracting, one possible model is risk adjusted monthly rate per member for primary care, FFS with reference pricing for urgent care and severity adjusted episodic rate for scheduled inpatient care.

Each model should include adjustment for quality. Instead of using all CMS quality measures, the plan administrators can choose to focus on the measures that are important for their organization. For instance, if surgeries make up a big part of your costs,  you may want to pay higher to providers who have lower surgical complication rates because their outcomes are better.

Providers engaged in value-based care are likely to have a lot of data about your employees, you should seek assurance from them about their data security policies, procedures as well as reports on third party audits.

Value-Based Care Design

Value-based care design requires that providers provide both longitudinal, relationship based care management, and short-term, goal-oriented care management. By applying risk stratification, providers should identify members, their concerns and the level of care needed for each cohort.

In value-based care, the providers should be utilizing multiple channels (text, emails, portal, home visits, group visits etc.) and include chronic care management, behavioral health, self-management and medical management.

ACO care delivery model for employersCare coordination services are important components of value-based care delivery.  Providers may want to reduce the cost of care by steering members to their internal network, but it should not be done at the expense of member’s experience. The care coordination design should improve the transitions of care where the physicians are working more closely with hospitals and emergency departments, as well as with high volume specialty service providers.

Employers should ask for better data sharing on clinical, operational, financial data as well as reporting on quality measures such as HEDIS.  Other metrics impacting employee experience such as same-day appointments, doctor follow-ups, plan adherence, care plan per member, health performance against goals etc. should be checked against claim data to get a real-time insight into care delivery.

Value-based care holds a great promise for employers. It is designed around the specific needs of your employees who benefit from a team that coordinates their care, and technology that connects them and their providers with information to help get the right care — it is also going to reduce the costs for you.

Talk to us about how our health insurance solution can reduce costs, improve health outcomes and provide you better visibility &  control over your health benefits.

Request a free demo

We’ll get back to you promptly.

How can employers bring structure to health plan design?

No organization can be competitive in the global economy without healthy and productive employees.

Employer-sponsored health insurance plays a significant part in maintaining employee health, unfortunately most plans’ designs are reactive in nature, focusing heavily on providing medical services after employees get sick and not much on helping employees and their families improve their health.

That has obviously not worked well. The “total” cost of a health care for a company should include medical, dental, pharmacy and vision claims, but also include lost productivity from absenteeism. This total cost is growing at an unsustainable pace.

With this trend,  companies should demand the same focus on cost constraints and ROI as they do for other areas.

The following steps can help in creating a structured approach to health plan design. This will enable plan administrators in understanding the key metrics to focus and regularly measuring the plan performance against them.

Step 1: Identify goals and metrics

The employee health plan should be designed in alignment with the overall business goals. Despite its obviousness, less than 10% of the organizations have a written strategic benefits plans with measured goals.

By clearly defining goals and metrics—whether in cost savings, morale, productivity, job satisfaction,  absenteeism and presenteeism—on a regular basis, companies can accurately identify issues and make constant adjustments necessary to boost health plan performance.

Step 2: Data Collection and analysis

Data collection and analysis are important to provide a baseline status of your objectives and metrics. The data sources may include employee medical costs, productivity measures, workers’ compensation costs, short- and long-term disability costs, and biometrics. Bringing consistency into this process will go a long way into driving the necessary behavior changes in employees, providers, and management.

The analytics should be designed around the metrics established in step 1. This should be as specific as possible. For example, if you have a chronic disease management program, what are the goals of the program (lower HbA1C by 1%, Reduce weight by 3%, Reduce absenteeism by 5%)? Once these metrics are established, you can start monitoring and managing them.

Step 3: Discover Employee Preferences

Isn’t it better if companies ask the employees about their preferences rather than just asking brokers? Determine which services and benefits have value for employees- whether they favor low cost over a broad network, or whether a certain type of benefit is higher priority over the other. This can be done using web based surveys.

Step 4: Determine high cost drivers

Costs based on Conditions

Determine which health conditions drive total costs, including medical costs and lost productivity. This can be done by analyzing medical claims data in conjunction with payroll, employee performance and worker compensation data. Get a good understanding of the risk profile and total cost of prevalent conditions of the covered population and its impact on health status and productivity for the workforce.

Costs based on network

Do variability analysis across providers in your network. Understand what providers are charging higher for similar conditions in different locations with similar quality. This will help you remove providers who add limited value, but contribute significant costs to your plan. You can also do that based on services- for example pathology, imaging, outpatient etc.

Step 5: Create Cohorts

The needs and preferences of the workforce are growing more diverse, increasing the need for flexibility to build more modular and customized health plan designs. The more progressive the organization, the more flexible the design needs to be,  to appeal to the needs of four different generations of employees working side by side.

The data collected from step 3 and step 4 can be used to create such cohorts. This can be  based on disease groups and/or employee preferences including people who care most about the coverage vs. employees who would like to reduce their out of pocket costs.

Step 6: Benefit Design

Design benefits specific to each cohort.  The focus of each benefit is to have a positive impact on healthy behaviors that leads to increased productivity, reduced medical and workers’ compensation costs and a better bottom line. Employees should also see the path to cost savings in the form of lower insurance premiums and co-pays.

Step 7: Aligned Network

Most organizations continue to actively shift costs to employees, yet they are reluctant to pull the levers that control access to benefits and manage their utilization.  More than 80% of your costs go to providers. Controlling spiraling claims and costs that inflate premiums is paramount. Now that you know what employees care about and the key cost drivers, get a network that is aligned to your goals- a network that can deliver on providing the best experience to employees, can provide you visibility and reduce your costs. Set operational processes that facilitate better collaboration with such providers, establish incentives and centralize accountability.

Step 8: Test plans

Once equipped with data, use tools to find out how employees in the cohort would react. Get incentives in the mix. The right incentives go a long way in influencing employee participation, which impacts health and drives cost and productivity improvement.  Incentives can range from cash cards and reward points for catalog shopping to a reduction in co-pays or premium contributions.

Step 9: Communicate

Communicate to employees early, effectively, and often. Provide customized employee-facing communication pieces for each plan. Engage employees to make the best benefit choices for themselves and their families. The goal is to help your employees become savvy healthcare consumers in order to lower costs for both parties.

Step 10: Evaluate

Monitor the metrics for healthcare cost drivers and health program results on a regular basis. Are the goals defined in step 1 trending in the right direction, if so accelerate the pace of improvement.

Talk to us about how our health insurance solution can bring a structure to your process, reduce healthcare cost and create great experience for employees.

Narrow network and value-based-care are not the same thing for employers

Narrow networks have been in the news for the last few years. A number of carriers have started to offer this to employer-sponsored health plans as well as to individual marketplace. This concept is marketed differently than what it really is.

Narrow network is essentially a higher discounting method based on an assumption that a provider will offer more concessions when their competitors are excluded from the network. The higher discount is supposed to bring down the overall cost of the care for self-funded employers. Typically layered in tiers, narrow network becomes Tier 1 and broad PPO network is offered at a higher cost.

This is no more than a short term fix because it does not address the basic problem of accountability. By becoming part of a narrow network, a health system is not declaring that they will be accountable for the care they provide to your employees, that they will report on the outcomes that are important to you, that they will align their payments to meeting your quality measures or they will provide more visibility and better experience to your employees and their families. None of that. All they are promising is a better discount. Given the lack of transparency and huge variability in healthcare costs today, that does not mean much.

Even if the agreement between the carrier and network is value-based, employer don’t gain much from that. If the provider delivers on the promise of reducing costs in a risk-reward model, provider and carrier split the savings, employers not so much. If that does not happen, providers don’t make more in incentives, but the employers still pay for the higher costs.

In other words – Heads I win, tails you lose.

This approach will work only if the employers themselves are part of the equation, have full control over what benefits they require from the ‘narrow network’, what outcomes are important for them and what contractual arrangements will make sense to get value for the care.