Quality, Value in Mix with Total Cost of Health Care

Wichita Eagle, The (KS)
July 14, 2008

Employers committed to tackling high health care costs are beginning to embrace value-driven solutions over short-term cost-shifting strategies. For years, employers have raised deductibles and increased co-payments and employee contributions. Some have started wellness programs. Others have cut benefits or dropped insurance altogether.

But a new movement is under way that shifts the focus away from containing costs and toward enhancing the value of services paid by employers. "It's not just checking a box saying, 'Yes, we provide health benefits,' but it's going the extra steps and saying, 'Our health benefits need to accomplish XYZ for us," said health care strategist Ron Whiting, executive director for the Wichita Business Coalition on Health Care. "It's very purposeful."

Analysts say the shift has the potential to empower employers, allowing them to maximize their return through benefits designed to keep employees healthier longer. "It means the employer is being more engaged and asking more questions about quality and things that drive costs," Whiting said. "It's thinking about it in more ways than just how can you get the lowest price."

In this case, value must equal the clinical benefit for the money spent, analysts say. For example, employers whose claims data suggests their employees have a high incidence of diabetes might spend more money on lowering co-payments for diabetes care and related drugs in order to improve the health of employees. In the end, employers pay less because employees aren't seeking expensive emergency care for diabetes-related illnesses. "Value-based benefit design basically provides special benefits to encourage people to take care of a medical condition they already have," said Gary Hardman, president of Hardman Benefit Plans in Wichita. "We don't want a barrier for cost to be a factor."

Promising Results

The idea really took root a few years ago with a two pilot projects. In one, Pitney Bowes reduced co-payments for users of drugs commonly prescribed for diabetes, asthma and hypertension. In 2001, the company told the Wall Street Journal that it had experienced a one-year savings of $1 million because of the experiment.

The city of Asheville, N.C., also instituted a value-driven plan that, among other things, lowered co-payments for selected medications for employees with diabetes. The Asheville project reported five-year outcomes that include marked increases in medication adherence, a two-to- threefold increase in achieving diabetes performance measures, a roughly 50 percent decrease in average annual sick leave, and a trend in overall medical costs that was 58 percent below expected levels, according to the health policy journal Health Affairs.

Great Potential

"I'm still just trying to understand it all, but I believe it's got great potential to have a long-term impact," said Mathew Mount, controller for Wescon Products, a Wichita manufacturing company. Like many employers, Wescon struggles to afford meaningful benefits for its employees. The company added a rewards-based wellness program through Preferred Health Systems this year, which Mount said has gone a long way toward increasing employee awareness and participation. "For us, the whole process started the question, 'How do we increase participation and keep costs where our employees can afford it?' " Mount said. "We were on a downward spiral, and we needed to change that.''

He said employers are being forced by economics to address the problem instead of simply being victim to it. "Employers need to understand (health care) isn't just an item we have to pay for,'' Mount said. "We need to understand where the costs are coming from and all the variables involved, including getting involved in our employees' health.''

Gaining Acceptance

Insurance brokers such as Hardman said value-based plans are starting to become a regular discussion with clients. Many will likely become torchbearers for the strategy, which is so new insurance companies haven't embraced it yet. But that will change as more employers demand it. "Employers are looking for ways to lower their health care expenses," Hardman said. "But in this case, they've got to spend money to save money. "Implement a wellness plan, implement a value-based benefit design. The costs will be higher, but the return on investment will be one of the best investment the company ever makes."