“Value-based” explained: quick answers to employers’ questions

COVID-19 has forever altered the business landscape. Employers and their benefits advisors must think differently about health care benefits if they hope to control costs and retain top talent in the “new normal.” The fact is, health care costs are rising, people who’ve delayed care during the pandemic are sicker, and we face an unprecedented mental health tsunami.

Health care policies have long required us to choose between two alternatives: cost or access. Now, we must rethink these twin lenses. Why either/or? Why not both?

We stand at a crossroads. By exposing weaknesses in current health care structures, COVID-19 has caused employers and employees to re-evaluate their benefits. They want to derive the most value from the services for which they pay. Increasingly, that means employers are turning to their benefits advisors for consultative advice about the advantages of value-based insurance models, and how they differ from “traditional” benefits offerings.

Related: Lessons from COVID: Health care transformation starts when employers demand value

To prepare for such conversations, here are some key questions asked by employers who are trying to understand value-based models, along with some ways benefits advisors can describe the financial and clinical value to employers:

Q: What is a “value-based” benefits offering?

An excellent way to answer that question is to explain that value-based offerings focus on health outcomes — both financial and clinical. Pharmacy benefits, for instance, should not focus solely on retail-like drug pricing conversations. Instead, the discussion must revolve around how to provide the right drug, at the right cost, at the right time. It’s not about pumping more drugs into the system.

Value-based offerings recognize that the artificial “cost versus access” dichotomy is flawed. Why should you have to shrink your formulary or create network carve-outs in order to control costs? That doesn’t make any sense. Access is the backbone of health care done right. And, since employers pick up 82% of the tab, cost has to be done right as well. Value-based benefits align incentives to ensure employers get health care access and cost benefits, not either/or.

Q: How do value-based approaches to benefits drive down health care spend?

Benefits advisors can best answer this question by first explaining a few facts: First, health care spend is projected to grow faster than the economy over the next  10 years. Next, pharmacy spend is more than 25% of employers’ total plan spend, according to the Society for Human Resources Management (SHRM).

Roughly 25% of an estimated $3.8 trillion in health care costs is waste, according to health care economists. That waste manifests itself in every single employer’s utilization numbers. The smartest way to drive deep spend reduction is to eliminate it through appropriate clinical pathways.

Value-based benefits incentivize finding the clinical pathway that drives up adherence and results in positive health outcomes without racking up unnecessary medical expenses. The more incentives are aligned, the lower an employer’s total spend.

Q: How does a value-based approach get to the lowest cost but still take great care of my employees and their families?

A value-based approach requires benefits providers to embrace the fact that a clinical strategy cannot be one-size-fits-all. They have to offer more than broad, condition-oriented clinical programs. An employer in Sacramento, California is different than one in Dubuque, Iowa, or one in Trenton, New Jersey. Every employer’s population is distinct, which makes their drivers of health care spend distinct—so they can’t be treated exactly the same way.

Value-based benefits providers recognize that positive health outcomes matter as much as financial outcomes. They lower PMPM, ensure it’s sustainable, and do it the right way. What is the right way? It’s about clinical appropriateness. It’s understood that value is derived from a whole lot more than just the financial element; it’s the clinical and emotional aspects of care, as well.

Q: Aren’t value-based benefit providers the same as those that have condition-oriented clinical programs, like those that help employees manage their diabetes or weight? 

The short answer is no, and employers should clearly understand the difference. Condition-oriented clinical programs have been around for 20+ years, but have done very little to bend the cost curve. Here’s why: They don’t account for underlying comorbidities alongside the dominant condition being treated. Those underlying comorbidities drive up clinical and financial risk—and therefore, costs. By narrowing the focus to one dominant condition, benefit providers fail to create opportunities to address critical social, behavioral, and physical issues to improve care and lower costs.

Value-based benefit providers consider a wide variety of factors, including comorbidities and polypharmacy. By examining members’ whole health – and not just the condition – they manage employee health more efficiently and proactively.

Demand more value

We are currently at an incredible inflection point as a health care benefits industry. Benefits advisors have a unique opportunity to help employers shape a new and better future for health care in America. It’s time to help employers think differently and demand more.

Why should employers pay 82% of the tab for health care, yet have no control over the outcomes? Benefit providers need to help employers get dollars-and-cents results in a way that makes their employees feel cared for and satisfied. In short, benefits must evolve to deliver more value.

Karthik Ganesh is CEO of EmpiRx Health.