State Employee Health Plans and Cost Containment Initiatives (2022)
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Glossary of Cost Containment Initiatives
Benefit Design Initiatives
| Value-Based Insurance Design (VBID) | Benefit design that provides incentives for policyholders to seek high-value, cost-effective services (i.e., primary care, generic drugs) through lower cost-sharing. Some programs also increase enrollee cost-sharing for services that are considered lower value. |
| Reference Pricing | A program in which the health plan surveys provider prices for a specific service within a defined geographic area and determines a cap or “reference price” as the maximum they will pay for that service. If the enrollee chooses to receive services from a provider that charges a higher price than the reference price, the enrollee must pay the difference. This type of reference pricing should not be confused with initiatives that peg provider reimbursement to a percentile of the Medicare rate. This is also often called reference pricing. |
| Right to Shop | A type of benefit design that allows enrollees to share in the cost-savings associated with choosing lower-priced providers or services to incentivize high-value choices in providers and services. |
| Wellness Incentives | A program that attempts to encourage enrollees to adopt healthy behaviors or achieve a pre-determined health outcome (such as body mass index or cholesterol level) by tying health plan premiums or cost sharing to participation in a wellness program or achievement of the health outcome. |
Provider Payment and Network Design Initiatives
| Narrow Provider Networks | A plan that limits coverage to a select set of hospitals, physicians, and other providers. Similar to an HMO, these plans may not cover the cost of services received out-of-network. |
| Tiered Provider Networks | A plan that groups or “tiers” providers based on their performance on cost and/or quality metrics. Enrollees are encouraged to seek services from the top performing providers through lower cost-sharing. |
| Centers of Excellence | When health plans incentivize the use of integrated medical systems that have demonstrated their ability to deliver superior patient outcomes at a lower cost for different groups of conditions such as heart, cancer, spine and transplants. |
| Reference Pricing Provider Reimbursement | The plan or payer pays providers a non-negotiable, established rate that is equal to or a percentile of a reference rate, such as the price Medicare pays for the same service. This should not be confused with reference pricing or “Right to Shop” initiatives that adjust enrollee cost sharing based on provider costs. |
| Risk-Based Contracts with Providers | Financial arrangements between insurers and providers in which providers take on financial risk through either rewards or penalties associated with lower costs, patient health outcomes, or performance on quality measures. |
| Direct Contracting with Providers | Direct-to-provider contracting is a strategy in which a self-insured entity negotiates a contract directly with a provider of health care services rather than through a TPA. The goals of such efforts include obtaining lower provider prices than achieved by the TPA, engaging in a risk-sharing program, or encouraging value-based care. |
| Primary Care-Based Initiatives | • Worksite Clinics or Near Worksite Clinics: A setting in which an employer provides access to medical services exclusively for its employees. Clinics are often located in close proximity or in the same facility as the workplace and are offered as an employee benefit for easy access to health services for employees. • Direct Primary Care: A model of delivering primary care services that charges patients a monthly, quarterly, or annual fee in exchange for on demand primary care services that often also includes laboratory services, care coordination, and disease management services. • Patient-Centered Medical Home: A primary care delivery model that emphasizes comprehensive and coordinated health care. Medical homes are accountable for meeting the physical and mental health needs of patients with an emphasis on prevention and wellness. Services are often delivered by a care team that includes a wide variety of providers including physicians, advance practice nurses, pharmacists, dietitians, social workers and care coordinators. Care is expected to be accessible after hours on an urgent basis, following high quality and safety practices. |
Utilization Management Initiatives
| Case Management | A program for enrollees of a health plan who have complex health needs or are high-cost members to help them manage their care and utilize services in a cost-efficient way. |
| Disease Management | Programs that provide structured treatment plans that intend to help patients better manage their chronic diseases. They typically include an element of health education to engage patients in their care and sometimes provide care coordination between different providers helping patients manage multiple chronic diseases. |
| Prior Authorization and Other Methods of Utilization Management | Prior Authorization: Approval from a health plan that may be required before you get a service or fill a prescription in order for the service or prescription to be covered by your plan. Utilization Management: Tools that health insurers and employers use to limit the overuse of health care services by imposing restrictions or gatekeeping to certain health care services like prior authorization or step therapy in order to contain costs and prohibit inappropriate utilization of health care services. |
Other Initiatives
| Annual Spending Growth Target or Cap | A pre-established target for the overall growth of health care spending for a particular population, as set by an insurer, employer, or state government. This approach can be enhanced by imposing financial penalties or other incentives to ensure plans and/or providers adhere to the spending growth target. |
| Price Transparency Initiatives | Member shopping tools and cost or price transparency requirements for payers or providers. |
| Behavioral Health Management Strategies | Strategies that health plans use to reduce costs with respect to mental health and substance use disorder services. For example, by subcontracting with a separate entity responsible for administering mental health or substance use disorder benefits, also called a behavioral health “carve out.” |
| Auditing of Claims | Utilization auditing, payment accuracy, fraud identification |
| Procurement Strategies (e.g., Reverse Auction or Invitation to Negotiate | Reverse Auction: A process by which the state shares bid information among competing vendors in order to incentivize lower offers in subsequent rounds of bidding. |