Employer-Designed Health Plans Gain Traction

“Value-based” plans could save up to 12 percent according to healthcare actuary

July 15, 2009 -- President Obama might want to take a serious look at how Oregon insurers and employers intend to transform healthcare in 2010.

Many of his ideas have been incorporated into the work of a local group known as the Health Leadership Task Force – bending the cost curve, relying on evidence-based medicine, reducing financial barriers to chronically ill people and supporting prevention and wellness to create a culture of health. 

“This could have national implications,” admitted Denise Honzel who’s spearheading the project. “The big challenge will be communication – how to explain this to people. It creates a different conversation on the appropriate use of healthcare. Right now cost is being determined by supply and preference.”
The big test comes this fall – when five of Oregon’s insurers try to convince large employers (50+employees) to choose what’s known as a value-based plan. There’s definitely a cost saving – an 8-12 percent reduction in premiums, according to an analysis by David Axene, a healthcare actuary.
“This new value-based plan design might be a bit ahead of its time,” acknowledged Jack Friedman, CEO of Providence Health Plan, which is putting together such an option. “But it does offer some new thinking. Not all health services are of equal value, and we need to be more transparent about that.”   
Regence BlueCross Blue Shield, PacificSource Health Plan, The ODS Companies and LifeWise Health Plans are also taking the plunge. Missing from the list are Health Net, which is staying on the sidelines because of potential administrative hurdles, and Kaiser Permanente, which is working on its own unique design. 
Here’s how the new insurance plan shapes up:
  • People with chronic conditions will pay no deductibles and be charged only a minimal co-payment to manage their care. By reducing financial barriers, fewer people will seek emergency room care or require hospitalization. The list includes depression, diabetes, asthma, congestive heart failure, coronary disease and chronic obstructive pulmonary disease. 
  • People will pay much higher deductibles, co-insurance and co-payments for healthcare services that offer little clinical value and are driven by provider preference or supply. The list includes spinal surgery for pain, shoulder surgery for osteoarthrosis, knee arthroscopy, knee and hip replacements, hysterectomies, coronary artery bypass grafting, upper endoscopies, visits to the emergency room and imaging tests – MRI, CT and PET.
  • All other services would fall under the standard deductible, co-insurance and stop loss provisions.
“The health plans are moving forward with product implementation, and we don’t know what the market acceptance will be for the value-based plan,” Honzel said. “We’re just venturing out now. The concept is very appealing. This is the first time it’s been out of the box.”
Employers might want to look at SAIF Corporation’s experience with such a product. It’s ahead of the pack thanks to Ken Van Osdol, compensation and benefits manager. Two years ago he convinced Providence executives to develop a similar plan focused on prevention.
“My goals are to create a healthier work force and mitigate the healthcare cost trend,” he said. “I don’t want to wait for the feds to tell us what to do. We’re moving toward individual responsibility.”
Now his employees receive free screenings for high cholesterol and diabetes and free drugs for such conditions. But when they ask for an imaging test, such as an MRI, they’re charged a co-payment.     
Because of the spiraling costs of healthcare, the state’s major business organizations encouraged the health insurers to forge an alliance, which led to the creation of the Health Leadership Task Force. Participants included the Oregon Business Association, the Oregon Business Council, the Oregon Coalition of Health Care Purchasers and Associated Oregon Industries.  

Besides working on the value-based design, Honzel is coordinating efforts that focus on evidence-based practices, payment and reimbursement reform and administrative simplification.


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