Valuing Value: California Mines New Health Coverage Plan Concepts

As the push to manage health care costs and help employees become smarter health care consumers gains traction at companies across the country, California is emerging as a sort of testing ground for a concept known as “value-based insurance design.”

Also known as a VBID, the plans aim to reshuffle how medical dollars are spent by assessing the clinical value of a service to a particular population, such as asthmatics or diabetics, and adjusting out-of-pocket costs to make necessary care more affordable and less beneficial care more expensive. The value-based concept also encourages employees to take charge of their health by offering rewards, such as lower premiums or gift cards, for participating in wellness programs or meeting certain health goals.

“We consider VBID to be the next iteration of benefit design, like consumer-driven health plans,” says Martin Watson, CEO of SeeChange Health. “Over the next few years VBID will be as commonly heard as CDHP.”

SeeChange Health as well as Blue Shield of California are two San Francisco-based insurance companies that are stepping up efforts to market value-based plans to large employers.

Watson says that the Golden State is a great testing ground for new health insurance models in part because of its large population and an apparent resistance among employers and insurance companies to shift more costs to the consumer.

“California is such a massive market, so it’s a nice area to go after,” he says. “If we can get California to embrace this, then we’re confident we can make it elsewhere. Employers and brokers are conservative here. This is the only market in the country where HMOs have really worked.”

SeeChange Health launched its first value-based product in 2011 when it began offering small and midsize employers a plan that provides financial incentives to encourage employees to access preventive care and manage chronic conditions. The program also provides up to $1,000 deposited into a health-incentive account that members can use to reduce their out-of-pocket costs once they get a physical, take a basic lab test and complete a health-risk survey.

The company, which introduced an option for large self-insured employers in the fall, is now “going after the Ciscos, the GEs and the Intels,” Watson says.

Last year, Blue Shield of California unveiled its value-based plan. Known as Blue Groove, the plan offers participants a choice of three benefit tiers, depending on how much they want to participate in improving their health. So far, two companies have signed on, including Blue Shield of California, which rolled out the plan to its nearly 2,000 employees in the Sacramento area this fall.

The basic tier is for people who don’t want to participate in wellness activities and want the broadest selection of providers to choose from. They pay the highest out-of-pocket cost. The middle tier offers lower out-of-pocket costs, including low or no copayments for some services and requires participation in health-risk assessments. The third tier has the lowest out-of-pocket costs and the richest benefits and is designed for those with chronic conditions whose care is overseen by a team of doctors.

The premium for Blue Groove is 10 to 15 percent lower than a standard Blue Shield HMO plan, says Michael O’Neil, director of product innovation at Blue Groove.

While employers and insurers had initially been slow to embrace the concept of value-based design, Suzanne Delbanco, executive director of Catalyst for Payment Reform, a San Francisco-based national coalition of health care purchasers, says that her organization’s goal is to have at least 20 percent of all provider payments be value-based by 2020.

“I think we really are entering a new era where employers are feeling quite confident that they will be able to work with employees to introduce a new level of consumerism,” Delbanco says. “Managed-care backlash has created a chilling effect on anything that remotely smells of restrictions in health care choices. But out of necessity and from the availability of data, the Internet and the ability to create online tools to help people make decisions, all that has led to a moment in time when employers are willing to push their employees to become more savvy consumers of health care.”

Rita Pyrillis is Workforce’s senior writer. Comment below or email editors@workforce.com.