Employers continue to search for ways to control healthcare costs. In the self-funding market there is an alternative model emerging as a creative option to traditional discount pricing through provider networks. Reference Based Pricing (RBP) is based on the Center for Medicare and Medicaid Services (CMS) costs, which is regularly accepted by providers for the services provided to patients. Medicare pricing is significantly less than what insurance companies pay.
For example, in 2015 the national average charge by providers for a Carotid Artery Stent was $73,220 but the average Medicare payment was $14,047 according to CMS. Under a RBP plan, employers set an amount, percentage, or range of payment for services provided. An employer plan that sets reimbursements at 140% of Medicare would have paid $19,667 for the stent procedure. Healthcare is one of the few markets that individuals have no idea of the cost until the bill arrives weeks later. Traditional models rely on non-transparent discounts negotiated by insurance companies.
Employers that implement a RBP plan can potentially put members at risk for balance billing. Balance billing is the difference between the amount paid by the plan and the providers charge. Given the complexity of the model and impact on members, plans engage a third party vendor to review bills and advocate for members. To successfully implement RBP, member education and assistance is essential.
RBP is an innovative solution and strategy for controlling health costs as employers look for ways to save money. To learn more about RBP or to see if it’s right for your company, contact Troy Snyder.
Information about the Author: Troy is IA, a Marsh & McLennan Agency LLC Company’s Vice President representing our Employee Benefits Division at Insurance Associates, a Marsh & McLennan Agency LLC Company, Inc. He joined the firm in 2001 and has over twenty-five years of employee benefits experience. Troy relies on his vast knowledge of the healthcare insurance industry to help his clients manage their benefits program through sound strategies and innovative, cost effective plan solutions. Troy heads a team of experienced professionals that have in-depth product knowledge, technical expertise, excellent communication skills, and are dedicated to providing best in class service to customers. He attended the University of Maryland and obtained a degree in Business Management.