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Value-Based Health Care Gets a Boost From the Feds

Expanded coverage under high-deductible health plans could entice employers to take part.

A White House draft executive order expanding coverage for chronic conditions under high-deductible health plans could eliminate a major hurdle for employers seeking to adopt a value-based approach to health care.

Chronic conditions, such as diabetes and heart disease, account for three-fourths of U.S. health care costs, according to the Centers for Disease Control and Prevention, making disease management a priority for employers. Value-based health care, which aims to eliminate unnecessary services and reward providers for improved outcomes, has proven effective in managing chronic diseases, according to Mark Fendrick, director of the Center for Value-based Insurance Design at the University of Michigan.

But under current Internal Revenue Service regulations many services that treat these conditions are not covered by high-deductible plans linked to health savings accounts until members meet their annual deductible. Only preventive services, such as cancer and high blood pressure screenings, are covered pre-deductible. As a result, employers have been slow to adopt a value-based approach.

The draft order, which was circulated in June, would open the door for more employers to incorporate value-based insurance principles in their benefits design, according to Fendrick.

“The amendment of the IRS regulations, which will offer pre-deductible coverage used to treat chronic conditions will be a very important step forward for value-based insurance design in that it may now be used in high-deductible health plans with health savings accounts,” he said. “It’s nice to see a common-sense idea move forward with bipartisan support.”

The number of employers offering high-deductible health plans paired with a health savings account has skyrocketed in recent years with some companies offering these plans as their only benefit option. About 29 percent of workers with employer-sponsored health coverage were enrolled in a HDHP in 2016, up from 25 percent in 2015, according to HR consultancy Mercer.

While these plans are controversial among employees who must dig deeper into their pockets to pay for claims costs, employers view them as an effective way to manage health care spending. However, these plans are incompatible with value-based insurance design, according to Fendrick.

While a growing number of states including Oregon and Vermont as well as federal Medicare and Medicaid programs have adopted value-based approaches, many employers were concerned that efforts to repeal the Affordable Care Act would overshadow its progress.

“After the election, employers took a new look at the health care landscape and we wanted to make sure that this push toward value-based continues to be a high priority,” said Bill Kramer, executive director for health policy at the Pacific Business Group on Health. “But we saw other issues crowding out the value-based agenda, like repealing and replacing the ACA. While those are very important issues we want to make sure that the value-based agenda doesn’t get overlooked in the current political discussions.”

In May, the Pacific Business Group on Health and the ERISA Industry Committee launched a campaign to educate policymakers on the merits of value-based health care. The program, called DRIVE Health — Delivering Results, Innovation and Value for Everyone — is designed to show how employers are using value-based principles to reduce health care costs and improve quality.

The initiative calls for greater transparency around health care pricing and quality, financial rewards for providers with improved outcomes and regulatory changes that allow for greater innovation, among other recommendations.

“DRIVE is about taking innovations from the private sector and injecting them into public policy,” Kramer said.

He pointed to Boeing Co., which bypassed insurers to work directly with hospitals and physicians to provide care through an accountable care organization. Launched in 2014 as a pilot project for employees in the Puget Sound area of Washington state, the ACO now covers about 30 percent of the Chicago-based company’s 54,000 eligible employees. Employees trade a smaller selection of providers for lower costs and perks such as same or next-day appointments or free generic prescription drugs.