Valued Based Insurance in Oregon

From Kaiser Health News:

Workers at a Portland, Ore., steel mill soon will be able to pick a new type of insurance that offers free care for some illnesses, such as diabetes or depression, but requires hefty extra fees for treatments deemed overused, including knee replacements, hysterectomies and heart bypass surgery.

The insurance, which will be offered by five different insurers in Oregon, is the most far-reaching and potentially controversial step in an effort by employers nationally to rein in medical spending by redesigning health benefits.

"We’re trying to make people better consumers," says John Worcester, head of benefits at Evraz Oregon Steel, the sole employer to sign up since the plans began coming on the market earlier this year.

Workers who choose the option over a more traditional plan next year could see their costs drop sharply if they have one of six chronic conditions but might pay hundreds more in deductibles and co-payments if they need a hip replacement or a heart stent.

The policies are among the first to apply financial incentives on both sides of one important factor driving up the nation’s health care tab: The underuse of proven treatments and overuse of certain surgeries and diagnostic tests that may be less valuable.

Proponents like Worcester say such efforts, dubbed "value-based insurance design," help steer patients to high-quality treatments, which could improve health and possibly slow health costs over time.

The article goes on to say that this will be an option for employees and only 10% are expected to choose it. Premiums for valued based benefits will be 10% less than the standard coverage.

I have followed value based benefits for years and looked into offering them when I worked at UPMC Health Plan. Two things were an issue for us at the time: First there was no evidence that this would save an insurer money and therefore allows us to offer the benefit at a reduced rate. All experience to that point was with self-insured groups over a fairly long period of time. Second our medical directors had difficulty developing a list of treatments it would deem "unnecessary" saying it really depended on the member's health needs. It is fairly amazing to me that the Oregon insurers have heart bypass surgery on their "unnecessary" list given the discussions I had.

It will be interesting to follow developments in Oregon. Presently five carriers are offering value based benefits but this steel employer is the only to offer this coverage as an option to its employees.