Role of Value Based Benefit Design in Value Based Purchasing

1. Role of Value Based Benefit Design in Value Based Purchasing Andrew Webber, President and CEO National Business Coalition on Health Integrated HealthCare Association Mini-Summit VII February 29, 2008

2. Mini Summit Objectives • To define value based benefit design • To better understand the role of value based benefit design as a key component of value based purchasing • To present philosophy behind and pioneering examples of value based benefit design

3. Membership of 60 business and health coalitions National network of thousands of employers and 25 million employees and their dependents Mission:Health and health care reform, through value based purchasing, community by community National Business Coalition on Health (NBCH)

4. Coalitions in Different Markets • Pacific Business Group on Health • New York Business Group on Health • Buyers Health Care Action Group • Midwest Business Group on Health • Florida Health Care Coalition • Greater Detroit Area Health Council • Puget Sound Health Alliance

6. NBCH at Work • Best Practice Distribution Network: - eValue8 – Common RFI for health plans - Leapfrog Survey, Bridges to Excellence, Asheville Model - College for Advanced Management of Health Benefits • National Advocacy: - Congress, CMS, CDC, AHRQ, NQF, QASC, HQA, AQA, NCQA

7. Value Based Purchasing

8. Four Pillars: Standardized Performance Measurement Public Reporting Payment Reform Consumer Activation/Consumer Choice Must be Driven by Purchasers/Payers. Creates Impetus for System Transformation Value Based Purchasing:Measure, Report, and Reward

9. VBP’s Aim: Behavior Change • Principally at provider and consumer level • Payment Reform: changing provider (i.e. supply side) behavior through reimbursement incentives – primary focus of this conference • Consumer activation: changing consumer (i.e. demand side) behavior through mix of support mechanisms including use of incentives – focus of this Mini-Summit

10. Consumer Activation and the Role of Value Based Benefit Design

11. Consumer Activation/Consumer Choice The Goal: To influence the individual consumer to make informed choices at many levels: • to live a healthy lifestyle; • to seek preventive services and care when sick; • to share in, and make the right, treatment decisions; • to comply with treatment regimen and self-manage, particularly chronic disease; • to select a plan, hospital, physician.

12. A Few Sound Bites Consumer Activation/Consumer Choice: • Area of greatest influence for employers; • Change the entitlement mentality; • Focus on front end health not just health care; • Establish a principle of self-responsibility but with robust support; • Support strategy includes creative mix of economic incentives, peer support, timely information, coaching/counseling

13. Consumer Activation Strategies: The Beat Goes On and On and On: • The Healthy Corporation • Worksite Wellness, the Healthy Cafeteria • Onsite Clinics • Disease Management and Employee Assistance Programs • Internet Education and PHRs and • Value Based Benefit Design

14. What is Value Based Benefit Design? An NBCH Working Definition: “The use of incentives, through the design of employee benefits, to encourage consumers to choose healthy behaviors, to seek high value health services, and to select high performance plans and providers.”

15. What is Value Based Benefit Design? Some Underlying Principles: • Individuals have a critical role to play in producing good health outcomes; • Individual cost sharing is both inevitable and needed in eliminating the consumer entitlement mentality. But blunt cost shifting can be counterproductive; • Incentives influence consumer behavior and should be aligned with outcomes we want to achieve; • Consumer incentives should be aligned with economic incentives for providers and other suppliers of health and health care services.

16. VBBD Applied to Health Insurance • Basic health insurance benefit architecture should tier medical services by evidence of effectiveness - and providers by evidence of performance • Co-pay levels should vary by tiers in a way to steer individuals toward effective services and high performing providers. And vice versa. • Economic incentives, through value based benefit designs, can influence better consumer choices but should be joined with timely information, coaching, and peer support

17. Examples of VBBD Choosing Healthy Lifestyles: • Destiny Health – Vitality Awards Program - Accumulate points for wellness activities/outcomes redeemed for gifts/trips • United HealthCare – Health Promotion Plan - Meet certain health maintenance goals, monthly insurance premium lowered

18. VBBD Example: Seeking High Value Medical Services HealthMapRx (aka The Asheville Model): • Reinvention of community pharmacy through consumer coaching/counseling • With waiving of copays for high value medications for certain chronic illnesses • Led by American Pharmacists Association Foundation • Supported by NBCH through national distribution agreement

19. Asheville Program Results • Over 1500 patients from 10 employers enrolled for diabetes, asthma, hypertension, lipid therapy management, and depression • Patients realize improved outcomes & increased medication adherence • 50% reduction in sick days • Zero workers comp claims in the City diabetes group over 6 years • Average net savings of $1,600-$3,200 per person with diabetes each year from year 2 on • Employers saved over $5,000,000 in health care costs

20. VBBD Example: Choosing High Value Health Plan General Motors Health Plan Steerage Program: • Measurement of Health Plan performance • Using eValue8, NCQA, and comparative cost data plans • Measures total plan contribution to quality and cost management • Results used to steer employees to high performance plans through premium share differentials

21. Health Plan Scoring Table HMO A HMO B HMO C HMO D Raw Score Flex Score (25) 211 24 221 25 176 16 129 5 eValue8 RFI Results Raw Score Flex Score (20) 13 13 7 7 14 14 13 13 HEDIS / CAHPS (CARS evaluation) Commendable 2 Accredited 1 Excellent 5 Excellent 5 NCQA Accreditation Raw Score Flex Score (5) 14 44 42 30 Total QualityScore (50) 24 23 47 20 13 33 19 12 31 22 14 36 • National Rate Rankings • Relationships of rates to Local Indemnity • Total CostScore (50) Total Quality + Cost (100) 61 77 73 66 Rating Below Avg Benchmark Strong Good Sample Employee Contribution $100 $20 $40 $55

22. In Summary • Value Based Benefit Design (VBBD) is a key element of Value Based Purchasing focused on influencing consumer behavior • VBBD is defined (by NBCH) as the use of consumer incentives, through employee benefit design, to influence choice of healthy behaviors, high value medical services, and high performance providers. • To be optimally effective, VBBD should be joined by other consumer support mechanisms.

23. Contact information Andrew Webber, President & Chief Executive Officer National Business Coalition on Health 1015 18th Street, N.W., Suite 730 Washington, DC 20036 (202) 775-9300 awebber@nbch.org www.nbch.org SAVE THE DATE: NBCH 13th Annual Conference November 9-11, 2008 JW Marriott Pennsylvania Ave, Washington, DC