Regence Wins First Value-Based Insurance Contract

Evraz, Inc. NA, formerly known as Oregon Steel Mills, will offer the plan to its employees next January

February 25, 2010 – John Worcester is convinced that a value-based health insurance plan will not only reduce healthcare costs, but create healthier lives for his employees.
“The problem now with insurance is that it’s someone else’s money,” said Worcester, director of compensation and benefits for Evraz, Inc. NA, formerly known as Oregon Steel Mills, which has 1,800 employees nationwide, 450 of whom work in Portland. “Now people will have more skin in the game, and they’ll be more engaged in preventing and treating illnesses.”
Worcester’s been working with the Oregon Health Leadership Task Force, which has decided to focus on reducing healthcare costs and wellness by creating a new value-based insurance product. Several insurers are participating, including Regence, Providence Health Plans, ODS Health Plans, PacificSource Health Plans and LifeWise Health Plans. Kaiser Permanente and HealthNet have not joined that effort. The task force was created by Oregon’s business community.
This fall Worcester’s employees will able to choose between the value-based plan administered by Regence and a HMO offered by Kaiser for coverage in 2011. Under the value-based model, people with chronic diseases will pay no deductibles and only charged a minimal co-payment to manage their care. That list includes depression, diabetes, asthma, congestive heart failure, coronary disease and chronic obstructive pulmonary disease.
However, employees will pay higher deductibles, co-insurance and co-payments for services that offer little very clinical value such as 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 such as MRIs, CTs and PET scans.
Worcester anticipates only a few people at the Portland plant will sign up for the value-based plan, but isn’t discouraged. “It will get off to a slow start. Whenever you introduce change, people are conservative and reluctant especially regarding healthcare.”
Eventually Evraz employees in other states may be offered this option. “We’re piloting this in Oregon and will have a chance to see what our employees think and be able to work out any bugs,” said Worcester, adding that healthcare costs have more than doubled in the past 10 years.
Worcester estimates his company will realize savings of 10 percent by offering this new plan. “In very rough numbers, using current dollars and costs of about $10,000 per employee, if 30 employees signed on, that’d be about $30k a year,” he said. “I’m guessing that’s very conservative because just managing chronic diseases effectively should produce savings.”
For example, if a diabetic can be kept on track and kept out of the hospital, it could represent a $10,000 savings, while avoiding a heart attack could create a savings of $35-50,000.
“We try to avoid people getting sick in the first place,” Worcester said. “We’re not like Walmart or a restaurant. We have employees who’ll be with us for 30-40 years. Our interest is to make them healthy.”
Besides the preventive approach, the value-based option appealed to Worcester because it’s “consistent with what we’ve been doing and will continue doing.” Studies indicate that 60-70 percent of every dollar is spent on chronic diseases such as congestive heart failure and diabetes.
“We have a fair number of diabetics,” he said. “Under the value-based plan there’ll be very little cost to these employees to stay on track with managing their diabetes. We recognize we need to help employees who are sick and have diseases, and we want to try to prevent those diseases. One of the biggest bangs for the buck is people who are low to moderate risk. That’s where we can save money by helping them not to become high risk.”
Worcester knows that money talks when it comes to healthcare. For example the company gives employees who participate in a wellness testing program a $25 gift certificate to Fred Meyer if they complete a health risk appraisal and biometric testing that includes having their blood pressure taken and their blood tested for cholesterol.
Employees also can receive a $300 wellness reimbursement account that can be spent on gym membership, nutrition programs or other wellness activities. Monthly wellness seminars are held on company time, and employees can meet with a nutritionist or a health coach.
That information is sent to Regence or Kaiser “and mined for future chronic diseases such as diabetes or signs of hypertension so Kaiser and Regence can reach out to those employees,” Worcester said. “The company doesn’t get and doesn’t want information about individuals. Instead it gets aggregate reports which guide wellness programs and other preventive efforts.” 
Over the past five years Worcester’s been involved with the Oregon Business Council, the Health Care Purchasers Coalition and AOI. He served as vice chair of the finance committee of the Oregon Health Fund Policy Board and co-chairs the health incentive and outcomes committee of the Oregon Health Policy Board.
To learn more about the work of the Oregon Health Leadership Task Force, click here.
To read previous articles about the value-based option plan, click here.
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