Designing Insurance Benefits to Yield Better Outcomes

Patricia Salber

Posted 12/12/11 on The Doctor Weighs In

Co-pays and co-insurance were introduced into insurance benefit designs to help curb over-utilization that occurs because something is completely free (the “moral hazard” of insurance). The problem is that these cost-sharing vehicles may also reduce the use of beneficial services, such as prescription drugs.

The concept of Value Based Insurance Design (VBID) is the idea that benefits would be designed in a way that promotes the use of services that bring value to the individual(s) consuming them. A commonly used example is eliminating co-payments for diabetes drug used by beneficiaries with diabetes.

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