Health Care Trends: Value-Based Health Insurance

The Kaiser Family foundation estimated that the average annual cost of a family premium for employer-sponsored health insurance increased 114% between 2000 and 2010. Faced with rising costs, employers are scrambling to find ways to save money while still offering employees quality health insurance coverage. This is one of the driving forces that has led the health industry to test a new model called value-based health insurance.

Under a value-based model, you would be encouraged to use procedures, treatments, services and drugs that are perceived to provide benefits that exceed their monetary costs. Conversely, you would be discouraged from using or over-using those whose benefits don’t justify the expense. You would be incentivized with lower or no co-pays for the beneficial services and dis-incentivized with higher out-of-pocket charges for the services deemed unnecessary or over-used.

The theory behind value-based health insurance policies is that you would be more discerning about insisting on a high-priced procedure like an MRI, a hip replacement or a brand-name drug if you had to foot a big part of the bill. At the same time, value-based health insurance coverage assumes that some things are so important to your health, you should be rewarded for using them. The attractive part of the model is that you aren’t denied the medical care as long as you’re willing to pay more for it.

The Patient Protection and Affordable Care Act (aka ObamaCare) already has a bit of value-based philosophy built into it. By mandating that all insurance plans offer certain preventive procedures such as mammograms free of charge, patients are being incentivized to take charge of their own health.

According to a November 30, 2010 article in the Washington Post (Like a lollipop at the dentist’s but for grown-ups) a 2007 survey by benefits-consulting company Mercer found that 80% of employers with at least 10,000 employers would be interested in adopting the value-based model.

Currently, the value-based health insurance model is being tested on a limited basis with large companies. But if the model proves successful, it could be introduced to a wider audience that includes small businesses looking for affordable health insurance quotes.