Value Based Insurance Design

Now here is a name written by either an academic or someone from finance – “value based insurance design”.  Try selling this to the masses.  But, regardless of the name, the concept is very interesting.  At the core, most of what I have seen revolves around companies (e.g., Marriott) reducing the copayments on certain drugs for patients that are compliant with other actions (i.e., taking other medications, participating in disease management programs).  I had provided clients with some advice on these programs 2-3 years ago before it had a name.  Now, we even have an Center for Value Based Insurance Design at my alma mater – University of Michigan.

The key challenge here is plan design and how to create incentives that motivate people to take the right actions.  Here are some of the questions that I remember struggling with a few years back:

  1. Do you reduce the price of all drugs (or some drugs or just generics) for patients that comply with recommended actions?  How much is meaningful?  If you make them free, does that change their perception of the costs and value of prescription drugs?
  2. What type of patient profile (e.g., tenure, age) will this work for?
  3. How do you track compliance?  Just because they register doesn’t mean they comply?
  4. How does this tie back in to broader health initiatives?  Are there other incentives that aren’t prescription based?
  5. How do you get this information into the hands of the patient in a timely fashion?

A lot of these questions play into the broader field of CDHC (consumer driven healthcare).

If you are interested in this topic, you should visit the Center and Activehealth.  Activehealth was acquired by Aetna and is clearly the leader in this space.

So…linking this back to BPM is pretty easy.  VBID takes a process (which is the patient’s healthcare) and establishes a series of rules (e.g., if they do X, lower their copayments on Y).  They systems need to connect a series of companies / databases to share information (think SOA).  Subsequently, the company investing in this type of solution needs a dashboard and reporting to understand their results and how their investment is paying off.  Finally (and ideally), the company needs to have some ability to do simulation and understand how changes to the rules might impact future results.

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