Negotiating Alliance Breakthrough Strategy Value-Based Benefit Design

Health care costs are rising with premiums potentially doubling in the next five years. A variety of factors are impacting this trend—including administrative inefficiencies, an aging population, new and expensive drug therapies, and public policy. At the same time, quality—measured by satisfaction, clinical quality and medical errors—shows little improvement. Central to the Pacific Business Group on Health's mission is its consistent advocacy that all parts of the health care system must be sensitive to a basic value equation. Plans, providers, purchasers and consumers must consider both the quality and cost efficiency of care provided.

In an environment marked by escalating costs in all segments of the market, and at the same time what appears to be stagnant products, services and quality, PBGH's goal of moderating cost increases while fostering quality improvements may seem like "mission impossible." Yet, PBGH's promotion of value in health care is taking hold at many levels.

A variety of PBGH initiatives seek to reward quality, moderate costs, develop innovative benefit designs, provide tools to members to be better purchasers, push health plans and providers to improve performance and problem solve in areas such as provider disruption.

Through the Negotiating Alliance and other purchasing strategies, PBGH seeks to support members in selection and contribution strategies for comparative value among health plans. Activities include:

• Restructuring performance measures and coordinating with all PBGH members to better reflect purchaser priorities and guide health plans.
• Assisting members in developing and assessing near and long-term purchasing strategies.

The Breakthrough Strategy is designed to encourage innovation and competition among traditional health plans and other providers. PBGH activities include:

• Supporting members to include Breakthrough elements, such as new Web-based consumer tools.
• Promoting the use of strategic benefit design that supports Breakthrough adoption.  For more information, see PBGH Member Benefit Strategies: Promoting Quality, Value and Access
• Leveraging traditional plans to adopt Breakthrough elements.
• Assessing current and new product offerings based on the critical elements necessary for quality and cost innovation and to engage consumers.

Value-based benefit design is an increasingly utilized strategy by employers to moderate health care costs while seeking to promote consumer engagement in prevention and health risk reduction.  In some cases, benefit designs can result in unintended consequences by creating obstacles to preventive care and chronic care.  Purchasers are often faced with making benefit design decisions based on actuarial assessment and marketplace experience, without the benefit of empirical evidence.  There is a great need for more applied research about the effects of various benefit design strategies.  PBGH partnered with California HealthCare Foundation and experts from PriceWaterhouseCoopers to assess the state of research evidence and to make the business case for further study in this area.