How to Improve the Consumer Experience and Reduce Out-Of-Pocket Costs Using Value-Based Insurance Design Models

The United States spends more on healthcare per capita than any other nation — including about $492 billion in out-of-pocket costs in 2021 — but so far that has not translated into better health outcomes. One innovation that is helping to both lower out-of-pocket (OOP) costs and improve health outcomes is value-based insurance design (VBID). This type of healthcare model offers lower or no OOP costs for “high-value” services, or those that have been shown to result in better health outcomes for particular people, and higher costs for “low-value” services, or those that provide little to no health benefit.    

These models can improve care, reduce health disparities, and make healthcare more affordable — all of which are much-needed outcomes. According to the Kaiser Family Foundation, nearly half of insured adults (46%) report difficulty affording their out-of-pocket costs; more than a quarter (27%) say that they have a hard time affording their deductible. When costs are out of reach, individual health may be affected: A 2022 poll found that 51% of people surveyed put off medical services because of cost.

In 2010, the passage of the Patient Protection and Affordable Care Act (ACA) mandated preventive care with no cost-sharing for plans subject to the law, including annual wellness check-ups, flu vaccines, and certain screenings. And in the last decade, federal regulators, employers, and health plans have explored the use of VBID models to encourage consumers to prioritize high-value primary care. These efforts aim to not only reduce costs for individuals, but they also build and strengthen the relationship between people and their care providers and improve outcomes by supporting whole health.
 

Value-Based Insurance Design (VBID) Models

VBID removes or reduces consumer cost-sharing in the form of out-of-pocket costs for high-value services — such as primary care visits — and retains or increases out-of-pocket costs for those services that provide little to no proven health benefit. In some cases, “low-value services” — such as screenings for low-risk individuals, a head scan for simple dizziness, or unnecessary lab tests — may actually harm an individual’s health. Additionally, VBID may give people incentives to use certain healthcare services that can help providers detect and treat potentially negative health events at an early stage before they lead to more serious health concerns or illnesses, or result in invasive procedures and even hospitalizations. The goal is to keep people as healthy as possible so they can live their lives to the fullest.

“The spirit of value-based insurance design is not a cost-driven initiative, but to make sure that the right levers are in place to make sure individuals get the right medical services, at the right time, in the right location, at the appropriate price,” says Mark Fendrick, director of the University of Michigan Center for Value-Based Insurance Design. “We came up with an idea 15 years ago that said, ‘Why wouldn't we set health insurance in a way that the good things — the things that make you healthier — would cost you little or nothing, and the things . . . that may not make you healthier would cost you more?’”

These value-based models of care have been tested in public and private settings and with specific patient populations, including those with diabetes or chronic obstructive pulmonary disease (COPD). VBID is also one of the ways that health companies are working to make healthcare simpler and more affordable, giving people the tools to make informed decisions about their care.
 

AJMC Study: Evaluation of Value-Based Insurance Design for Primary Care

To better understand the potential health and financial benefits of VBID models for consumers, we evaluated the impact of a large employer’s decision to remove employees’ and dependents’ out-of-pocket costs for primary care physician (PCP) visits. The study, Evaluation of Value-Based Insurance Design for Primary Care, was published in the American Journal of Managed Care (AJMC) and compared six years of data for their commercially insured members of our affiliated health plans who had no out-of-pocket costs for PCP visits (“VBID cohort”) with those who were responsible for those costs (“comparison cohort”). As part of the study, we measured how often consumers visited their physicians, total healthcare spending, out-of-pocket costs, and more.
 

Key Findings

The findings of the study revealed that by removing out-of-pocket costs for PCP visits, out-of-pocket costs for all physician visits decreased by nearly 13% annually for those in the VBID cohort. For the comparison cohort, who did not see a similar out-of-pocket benefit change, out-of-pocket costs for all physician visits increased by nearly 10%. Those in the VBID cohort also had a significant reduction in the number of outpatient and emergency department (ED) visits for conditions that could be treated with a primary care visit, compared to the comparison cohort. Total medical spending for the VBID cohort increased at a slower rate, translating to $12 in savings per member per month for the consumer and health plan compared with the comparison cohort.

“Primary care utilization improves care continuity, intensifies the patient-provider relationship, emphasizes potential disease prevention, and improves the management of existing conditions, which can reduce unnecessary specialist care, hospitalizations and emergency department visits.”

– American Journal of Managed Care, Evaluation of Value-Based Insurance Design for Primary Care
 

Potential Benefits of VBID for Employee Populations

By removing or reducing cost-sharing for primary care visits, employers can improve affordability for employees and help drive down the use of high-cost medical services, including ED visits and hospitalizations. Eliminating potential cost barriers to primary care provides opportunity for employees to work more closely with their physicians to address their personal and sometimes complex health needs earlier.
 

Potential Benefits of VBID for Employers

In a competitive labor market, employers can use VBID models to further differentiate themselves to prospective employees through their benefits offering. By reducing or completely removing out-of-pocket costs for primary care visits, employers may be able to attract more talent while supporting a healthier workforce. For employers who explore VBID, education is critical to ensure employees know that primary care and other benefits are available to them at no cost.

Removing financial barriers to primary care can create a more positive, accessible healthcare experience. It empowers and informs consumers by helping to lower their overall costs, strengthen their relationship with care providers, and emphasize the value of prevention. It’s all part of an effort to continually evaluate and implement innovative solutions that improve health outcomes and make healthcare simpler and more affordable.