Want Real Value-Based Care? End Annual Enrollment In Health Insurance

As the titans of the US health insurance industry convene this week in Portland for the meeting of AHIP, the industry’s trade association, there’s a bet on how many times the term “value-based care” will come up.

Can I put my money on infinity?

The term is surely over-used, but it’s worth reminding ourselves why value-based care is such an appealing concept and why so many organizations are embracing it. Our health system, we are often reminded, spends endlessly to treat people who are sick. If implemented properly, value-based care can enable healthcare systems to make longer-term investments that lead to a greater focus on preventative care and the effective management of chronic disease—keeping people out of the hospital and reducing total cost of care.

It sounds simple enough, but as I’ve written previously, the good intent behind value-based care often breaks down as health systems struggle to deliver value without compromising care. In practice, interventions that improve value are underutilized. Investors who seek to invest in value-based approaches find few truly worthy places for their capital.

It’s time to reckon with the underlying cause for the the mismatch between the promise and reality of value-based care: annual enrollment in health insurance. Think about it. We’re looking to make investments in prevention and effective treatment, and yet people under our care drop out of our plans on an annual basis. (This problem is evident in all types of insurance—commercial, Medicare, Medicaid, or Exchange.) How exactly do we expect to promote value—something that can only be achieved over a longer-term horizon—when our member base changes every year?

I propose that we move away from annual enrollment and move our entire insurance system toward long-term enrollment in health plans. I first heard the idea from a friend who is senior strategy leader at a state Blue Cross Blue Shield plan and it intuitively made sense. We could start with Medicare Advantage plans; the Center for Medicare & Medicaid Innovation should launch a trial program under which beneficiaries commit to remain with a single plan for at least three years. Instead of receiving a per-member per-month fee to provide coverage for each member, plans would receive fees that cover the whole three years. (This would also protect both plan members and the government from having to pay premium increases.)

Here’s what I think this experiment would yield:

• Health plans would stop offering shiny benefits that don’t improve health. A Commonwealth Fund survey shows that about 25% of people choose Medicare Advantage plans for the added benefits. As a result, plans compete with each other by offering potential members a host of benefits of varying efficacy. Low co-pays, zero-cost medications, dental and vision coverage are worthy benefits that help maintain beneficiaries’ health. Cash cards, rebates, and big allowances (benefits we have introduced at my company SCAN for competitive reasons) are nice to have, but they’re unlikely to have much effect on outcome after a serious diagnosis.

Without the pressure to keep members from switching to other plans, insurers could focus on developing products that don’t just catch prospective members’ eyes but improve their health in the long term.

• Plans would invest more in members and competition could focus on quality. Health plans make premium and other calculations knowing that some percentage of plan members will get sick after they switch to another plan, meaning those people’s healthcare likely won’t cost them very much. But if plans received a single amount to provide coverage to members for a longer period, then their focus would be on investing upfront in preventative care and long-term treatment. With assurances that a member would remain under their care (and responsibility) for three years, plans could begin to compete on long-term health outcomes as opposed to shorter-term process and satisfaction measures.

• Healthcare costs would go down. I’ve been burned by predicting cost decreases before, but it stands to reason that if payers invested for the long-term in disease prevention and effective treatment, their members’ health would improve, and their costs would decrease—savings that would be passed on to members and, in the case of Medicare, to the federal government and, ultimately, the tax payer.

• Commercial plans would get onboard. Commercial insurers spend handsomely to market and sell plans to employers each year. Their premiums often reflect the fact that not every employee group has the same usage patterns. But if commercial insurers could count on a certain percentage of their customers remaining with them for a fixed period of time, they could better manage their costs and tailor their products. Just as with government insurers, commercial insurers would see their costs decline by investing in disease prevention and treatment for a known and loyal member base.

Such a change may lead to (or require) another change that is probably long overdue: the unshackling of the tie between employment and insurance coverage. Perhaps in the future, insurance will become a defined benefit that covers an employee for three or five years or more and employers will contribute funds towards payment of that benefit.

• More investment in higher-cost therapies. Many therapies, especially those that are new, can be extremely costly and have long payback periods. It’s hard to entice an insurer to pay for an expensive novel drug therapy when the member may switch insurers in just a few months, leaving them stuck with upfront costs. But therapies whose long-term efficacies have been demonstrated become more financially enticing when their costs can be amortized over longer periods of time. This change would likely lead to the faster and more widespread adoption of new therapies.

I’ve asked people who have worked in healthcare far longer than I have why insurance is procured on an annual basis. The answer I usually get is, “I dunno. It’s something we’ve always done.” Annual enrollment is likely hardwired into regulation for historic reasons. “We’ve always done it that way” is not a good reason to do anything.

There’s nothing magical about a year—and it is clearly too short a period to meaningfully and durably improve health outcomes. It’s time to end annual plan enrollment. Doing so will unlock the promise and potential of value-based care. Maybe we’ll finally have a shot at actually driving down costs and improving outcomes rather than just talking about it.