Will People Choose Value Based Insurance Design?

By | May 14, 2019

There is a great deal of focus on the method people use to purchase healthcare. Though many believe in a market approach where individuals choose a product based on cost and how it will help them, healthcare purchases don’t typically fall into this same market dynamic, meaning there is a lot more complexity and variance to the care consumers are receiving. Because of this, a new product design by many insurance companies known as Value-Based Insurance Designs is attempting to address this approach to choosing healthcare.

Value-Based Insurance Designs (V-BID) aim to improve value by encouraging the utilization of high-value services and discouraging the utilization of low-value services by offering incentives to members to improve and align quality, service, and cost. Currently, three models include value-based benefit design; the first focuses on benefit-cost differentials favoring certain high quality and low-cost services, the second introduces reference pricing which increases consumers’ sensitivity to actual price differences amongst different providers by having them be at financial risk for the cost differential, and the third offers a narrower provider network that trades more choice for a lower price.

To understand if V-BID will work, a study was shared in Health Affairs by Perez, et al. that examined consumer decision making and choice among these three types of V-BID. Interestingly, they found most of the study participants were skeptical of the value-based trade-offs and instead wanted to seek out information on their own versus relying on the health plan to provide the materials.

Meaning, participants preferred to make their own decisions about their healthcare instead of using the data provided by the V-BID on what is the best quality available.

In fact, the participants, placed their relationship with their provider above quality measures of their physician. Questioning the validity of the data was cited as a reason when their interactions were incongruent with the presented information. This finding is not surprising, as relationships continue to drive personal decisions over qualitative data.  This exemplifies that the use of the present quality of information is not valuable to the average consumer, they don’t want to rely on data, they still want to build a relationship. Furthermore, the public also struggles to differentiate cost or price amongst services, since they are unaware that they can spend less without sacrificing quality.

Narrower networks are problematic as they limit choice, and consumers today, are not willing to trade the ability to choose for lower cost or better quality.  Again, this is an interesting notion on the value of provider’s behaviors as having more of an impact than the credibility of the data source, which favors personal experiences and word of mouth.

So, how do we manage to keep costs for healthcare down while also encouraging the public to adopt our information on quality? One answer is to allow the cost to continue to escalate and thereby bring attention to the reasons why and educate them to realize that financial sacrifice will have to occur.

But, a much better approach is to understand this dynamic of human behavior, the facts, and address how to educate and influence within these constraints. The questions that require answers are what are the trusted sources of information, how and who communicates said information, and what are the incentives that will influence change. The key to providing solutions is to understand and appreciate the complexity of the situation and thus, design solutions that incorporate all the particulars that affect decisions.