An increasing number of employers are exploring value-based benefits, a new approach designed to reward employees for improving or maintaining health while empowering them through education and coaching. While the concept may be new, two things remain the same.
The concept may be new, but two things remain the same. First, the role of the advisor is important and directly impacts the success of the program. Your clients need your counsel and assistance in implementing the components of the program. They need your ongoing efforts to properly position and communicate the benefits.
Second, program design is critical. Packaging different combinations of design elements produces an almost infinite number of possibilities. Rather than using a trial-by-error approach, it makes more sense to offer viable solutions using a structure that focuses on the key decisions made by the employer. You can effectively guide your client in their decision-making by addressing the three "B's" - behaviors, benefit structure and benefit levels/budget.
Behaviors
While most employers start with budget, it's actually more important to start with behaviors. Certain behaviors are inherent in a value-based benefit design such as a focus on prevention and health improvement. However, there are undoubtedly additional behaviors that the employer wants to target. The better defined the desired behaviors are, the more focused you can be in assisting your client with effective design.
For example, if your client wants to assist employees in stopping smoking, the benefits should include incentives and programs specifically targeting the behavior. The employer may host seminars at work or provide reimbursement for nicotine reduction therapies. In addition, the employer may put policies in place that prohibit any tobacco use on their premise.
Aligning yourself with insurers and third party administrators that are knowledgeable of the discrimination rules outlined in the Health Insurance Portability and Accountability Act and the Americans with Disabilities Act, as well as other state and federal regulations will allow you to design a program that meets their needs and complies with the law.
Benefit structure
Once you have determined which behaviors are important, the second step is to determine which benefit structure best reinforces those behaviors. For some this will be a health savings account or a health reimbursement arrangement. For others, it will be a traditional benefit design. The better you understand the behaviors that are important to the client, the easier it is to determine which solutions work best for them.
It is essential the benefit structure reward the identified behaviors. For example, if an employer wants to encourage adherence to maintenance medications, the benefit structure will need to encourage those behaviors. This could be accomplished by reducing the participant co-payments for their identified maintenance medications (commonly covered conditions include asthma, diabetes, cholesterol and hypertension) as long as they are filling their scripts timely.
Benefit levels/budget
The third step is the easiest, determining benefit levels and employee contributions that meet the client's budget. Although not difficult, this step includes some tough choices for organizations facing tight budgets. The better you understand your client, the better able you will be to help them make these difficult trade-offs.
Many times an employer implementing a value-based health care benefit design for the first time will want to start with their current offering as the richer benefit option for those who qualify. In addition to having higher levels of benefits, the employee contributions for coverage are typically lower. This approach reduces employee anxiety as the employees are already familiar with at least a portion of the benefits.
However, other employers view this as an opportunity to start with a new design, allowing them to be very strategic in their efforts. The employer relies on you to help formulate this new strategy and design.
Although good education cannot offset poor design, poor communication can destroy good design. In order to assist people with changing behaviors it is important to clearly establish expectations, provide participants with support and assistance, and report on their progress.
Using several different communication methods will enhance effectiveness as individuals have different learning styles. Employers should be prepared to educate in person, by phone, in writing and online. Using a variety of techniques reinforces the message and makes the communication more targeted. Communication efforts are ongoing throughout the year, keeping the initiatives front and center with employees.
The more things change the more they remain the same. Value-based benefit programs are increasing in popularity. Yet, the fundamentals remain the same. Design is critical to the success of an employee benefit program and the role of the advisor is more important than ever.
Employers realize the value
According to The Center for Health Value Innovation, employers are recognizing the importance of value-based design in boosting the health and wealth of their employees. A recent survey from the organization (the most comprehensive of its kind) found 79 percent of employer respondents that have incorporated VBD into their employee health programs didn't make any changes in 2009. Additionally, more than half of these companies (56 percent) anticipate no changes in these benefits for 2010.
"This survey is the first one that examines the experience of companies of all sizes and sectors who had a value-based design in place for two or more years," says Cyndy Nayer, president and CEO of the Center. "It validates the work of the Center, and expands the knowledge base of change and innovation for the market. In particular, this survey demonstrates increasing focus on employee assistance programs, depression, and financial counseling, which ties in with our goal to expand the definition of VBD and link it to total health and performance."
Other significant survey results include the use of VB levers to improve stakeholder engagement:
- 87 percent use for prevention/wellness
- 60 percent use for chronic care management
- 80 percent use for disease management
- 63 percent waive employee cost sharing for yearly screening exam
- 40 percent provide insurance premium incentive for completion of a health risk assessment
- 54 percent cover depression under care management program
- 70 percent reduce/waive co-pay for utilizing the lowest cost appropriate site of care (e.g., urgent care, convenient care, onsite services, medical travel)
- 58 percent provide incentives for the use of EAP programs
- 35 percent provide incentives for financial counseling
"With this survey we can now point to hard numbers that back up everything that we have been communicating regarding the power of VBD to transform health and the administration of health benefits in this country," says Nayer, noting that there is still work to be done. "We see a growing expansion of value-based design, linking the health and wealth of the individual to the health and wealth of the organization."
Typical features of value-based benefits
- A two-tier benefit design with qualification for the higher level of benefits based on participation in health improvement activities
- A fully integrated, data-driven wellness program
- Benefit design that reduces participant costs for medication adherence for identified chronic conditions
- Preventive care benefits that encourage early identification and intervention
- Robust, personalized participant education
Jerry Ripperger is director of business development for the Principal Financial Group.
