Improving Value

Consumer-Friendly Benefit Design

The term “benefits” refers to the services and other medical care covered under any health insurance plan. “Benefit designs” are the rules that dictate which services will be covered, which providers are in-network and cost-sharing amounts—such as deductibles, co-payments or co-insurance—that patients are required to pay.¹

In an effort to make premiums more affordable, health plans often scale back on covered services and/or increase deductibles (i.e. minimum amounts that people are required to spend before their coverage kicks in). However, studies have shown that placing financial barriers between patients and needed care does not incentivize them to become better “shoppers” and, instead, causes many to delay or forgo needed care. This undermines the goal of improving health and fails to drive value in the health care system. 

There are better approaches to designing benefits to incentivize desired behaviors while also aligning with people’s goals and needs. 

Making health the goal of benefit design, instead of using it as a tool to address health system problems

Ultimately, consumer-centered benefit design should support better health. To accomplish this goal, coverage should be comprehensive and cost-sharing obligations should be easy to understand, tailored to families’ ability to pay and make the “right” choice the easy choice by steering patients towards high-value care with proven benefit.

Coverage should be comprehensive 

Excluding medical services that a patient might need from their covered benefits does not support better health. Benefit designs should satisfy the following criteria in order to be deemed comprehensive:

• Coverage for pre-existing conditions—It has been estimated that as many as 1 in 2 non-elderly Americans have some type of pre-existing condition.² Many people rely on their insurance to help with the associated costs.  
• Coverage for unexpected illness or accidents—An unexpected illness or accident can strike at any time. Patients deserve guaranteed coverage for these events. 
• Coverage for maternity care, mental health and substance use disorders—It is in society’s best interest to ensure that expenses for maternity care,³ mental health and substance use disorders are affordable for all. 
• Dental and vision coverage—Dental and vision coverage are traditionally carved out of medical coverage, creating barriers to integrated, whole-person care.⁴   

As envisioned by the Affordable Care Act,⁵ covered services should also be standardized to support population health and reduce the variation consumers encounter when they try to compare health plans. 

Eliminate deductibles

Today, many health plans feature high deductibles that are rarely tailored to a family’s ability to pay. This contributes to the growing prevalence of under-insurance—the phenomenon whereby insurance coverage isn’t protective enough given a family’s financial circumstances.⁶ Evidence suggests that high deductibles encourage enrollees to delay or forgo needed medical care and cause financial hardship for patients. Moreover, deductibles are a “blunt instrument” when it comes to ensuring that patients consume the “right” (i.e. high-value) care. 

Use copays instead of coinsurance

From a consumer perspective, copays (a form cost-sharing that requires patients to pay a flat fee towards a covered service’s cost) are preferable to co-insurance (cost-sharing that requires patients to pay a percentage of a covered service’s cost) because financial obligations are more predictable and easier to understand.⁷  

Cost-sharing should decrease barriers to high-value care

In addition to being as simple and straightforward as possible, copay schedules should encourage the use of high-value services that contribute to better health. Examples include immunizations for children, counseling to prevent tobacco initiation among youth and tobacco-use screening, encouraging tobacco cessation among adults, alcohol misuse screening with brief intervention, and colorectal cancer screening.

To ensure that high-value care is consumed at the right level, payers should eliminate unnecessary cost-sharing for high-value services, as well as encourage providers to recommend these services to their patients and reduce environmental obstacles to receiving care (for example, by covering the cost of transportation). 

Conversely, low-value care, which refers to health care services that have little to no therapeutic benefit for patients, can be discouraged with cost-sharing if the service is initiated by the patient. If the low-value service is one that is typically ordered by a provider (for example, Vitamin D screening), then provider-specific intervention (like peer comparisons) should be used, rather than a patient-facing intervention like cost-sharing. 

More information on value-based insurance design can be found here.

Cost-sharing should be affordable

Consumers’ cost-sharing obligations should be tailored to their financial circumstances in order to avoid creating barriers to care. Moreover, affordability standards should be harmonized across public programs with respect to premium contributions, cost-sharing and the set of covered services. Employers should consider adjusting employee premium and cost-sharing obligations to correspond to wages.⁸  

Employ proven strategies for addressing the high cost of health care, lack of coordination and other problems that negatively impact consumers

To address the problem of under-insurance, cost-sharing and covered benefits will have to become more generous for many families. However, this doesn’t mean that premiums must rise proportionately. Nationally, minimal efforts have been made to address pricing outliers—unjustified price increases that cause health spending to grow faster than wages every year—particularly with respect to commercial insurance. Moreover, across most forms of coverage, we’ve done far too little to reduce the provision of unnecessary care, including medical harm. 

In order to improve health care affordability and value for consumers, multi-stakeholder approaches must address the root of high health care spending by:

• reducing low-and no-value care, 
• curbing excess health care prices,
• ensuring that care is coordinated, and
• ensuring that high-value care is delivered at the right levels. 

A Note about Health Savings Accounts 

Health savings accounts (HSAs) are tax-advantaged savings accounts designed to help people pay their medical expenses. In order to fund the account, HSAs must be paired with high-deductible health plans (HDHPs) meeting specific Internal Revenue Service (IRS) criteria. 

Although there is little to no evidence that HDHPs lead patients to consume the “right care,” they remain popular due to the tax advantaged savings potential of accompanying HSAs. Unfortunately, these benefits accrue to primarily to families who are well off financially—the U.S. Treasury finds that more than 60 percent of all HSA tax benefits accrue to families earning more than $100,000 annually—and most of the savings likely target retirement as opposed to funding health care expenses.⁹ While it is important to create fair and tax-efficient ways to save for retirement, it is not critical to do this as part of our policy approach to financing health coverage. 

Conclusion

While we still have a lot to learn about consumer-centric benefit design, new evidence refines what we already know. Experts agree that coverage should be comprehensive and cost-sharing obligations should be easy to understand, tailored to families’ ability to pay and steer patients towards high-value care in order to best support consumers’ health. Benefit designs should also be standardized to ensure that all consumers have equal supports, regardless of their coverage type. A more standardized, evidence-based approach to benefit design will also help regulators negotiate or set rates with insurance carriers and lower the opportunity for risk selection through plan design. 

 

Notes

1. Delbanco, Suzanne F., et al., A Typology of Benefit Designs, Urban Institute, Washington, D.C. (April 2016).

2. Centers for Medicare & Medicaid Services, At Risk: Pre-Existing Conditions Could Affect 1 in 2 Americans (Accessed on July 30, 2020). 

3. WFPL, This Is Why Men Pay For Maternity Coverage, Too (Accessed on July 30, 2020). 

4. NBC News, The Reason Your Dental Work Isn't Covered by Medical Insurance (Accessed on July 30, 2020). 

5. Families USA, 10 Essential Health Benefits Insurance Plans Must Cover Under the Affordable Cae Act (Accessed on July 30, 2020). 

6. The Commonwealth Fund, Underinsured Rate Rose From 2014-2018, With Greatest Growth Among People in Employer Health Plans (Accessed on July 30, 2020). 

7. Consumers Union, What's Behind the Door: Consumers' Difficulties Selecting Health Plans, Yonkers, N.Y. (2012).

8. While rare, some large employers (such as Pitney Bowes and General Electric) offer wage-based premiums. See: Fox Business, Higher-Paid Workers Get Bigger Bills for Group Health Insurance (Accessed on July 30, 2020). 

9. The Commonwealth Fund, Expanding HSAs Could Exacerbate Inequalities and Increase Government Spending (Accessed on July 30, 2020).