That the word “insurance” but not “incentive” appears in “health insurance plans” misses a key point and leads to some confusion. Perhaps the most accurate name would be “health insurance and incentive plans” but I’d settle for just “health incentive plans” as a reasonable alternative and one that puts the emphasis where it belongs.
Of course, health insurance plans are insurance in that they transfer risk from the policyholder to the insurer. In most cases they really do insure against financial catastrophe due to a serious illness. High deductible catastrophic coverage-only plans serve this role and this role only. But they risk throwing the baby out with the bathwater.
Most health insurance plans do more than insure against financial disaster. They provide coverage for minor costs of less-than-catastrophic events, many of them elective. Such coverage has appropriately come under criticism since it provides an incentive for overuse of unnecessary care, a moral hazard effect. If only the patient bore more (or all) of the cost of services for minor health events there would be a greater incentive (on the part of the consumer) to use care more judiciously.
However, not all relatively low-cost care is frivolous. Some of it is genuine preventive care that preserves health and saves money in the long run. Take hypertension as an example. It can be asymptomatic, and yet is a major cause of cardiovascular morbidity for which control usually requires lifelong treatment with medications. Good adherence to medications is difficult for patients to maintain and is a challenge to successful management. Making hypertension medications inexpensive for patients removes a proven disincentive of use, namely cost.
Charging copayments that vary with the efficacy and cost-efficiency of the service is an important concept in benefit design. A “benefit-based” or “value-based” cost-sharing system sets copayment levels lower for therapies proven effective and higher for costly benefits with little or no clinical value. Today health insurance plans do a poor job of aligning cost incentives with benefits of therapy.
I don’t blame insurers. It is a genuinely hard problem, and there is a lack of data on what therapies are more effective compared to substitutes. Moreover, even when data exist attempts to change provider practice and consumer utilization patterns based on it can be controversial. Nevertheless, in time and with more research health plans and the health system in which they operate can, should, and must do a better job of aligning incentives with efficacy. Part of the solution is to think of health plans not only as insurance but as health incentive plans.
