How Can Employers Cut Health Plan Costs with Reference-Based Pricing?

Capping health plan expenses is gaining attention. Employers and advisers alike have been buzzing about Medicare reference-based pricing (RBP), which is a relatively new solution for controlling health plan expenses set outside traditional insurance carriers. 

With Medicare reference-based pricing, employers can get in on the savings too, enabling them to control the costs of medical claims, both short and long-term. But some employers are still not clear about how reference-based pricing actually works despite the buzz around the method. 

Let’s try to help them understand how RBP works and why they should switch. 

What is Reference-based Pricing?

Reference-based pricing is a self-funded health plan solution that caps what the plan will pay providers for covered healthcare services. The cap, which is also known as an allowable amount, is based on a reference point or a chosen limit, i.e. the Medicare reimbursement rate, enabling clients to choose relatively low prices for treatment. 

RBP plans are different from traditional health plans in multiple ways. 

For indemnity plans, which have no network, reimbursements are generally calculated on the basis of the percentage of the usual, customary and reasonable (UCR) rate or rate for the service (R&C). On the other hand, when insurance carriers offer network-based health plans, they negotiate significant discounts on services as they contract with the providers. Those insurers divide the share of discounted costs between the plan and the participant and limit the reimbursement percentage of R&C and UCR. 

Basics of Referenced Based Pricing

Physicians are paid Medicare + 50% 

Facilities and surgical centers are paid Medicare + 50%

Concierge facility and surgeon quality with appointment setting 

Members have no copay or deductible if they follow steerage to select providers 

Balance bill legal protection for members calculated by Medicare claims repricing system

Why Choose Reference-based Pricing?

RBP is a cost-effective option for employers. Depending on the employers’ needs, an RBP plan structure is chosen. The RBP plans that use Medicare as their benchmark typically range between 120% and 170% markup to the Medicare reimbursement rate. This rate is way less than the 250% of Medicare reimbursement hospitals are seen billing employer plans as opposed to negotiated discounts with an insurer. In view of this, employers that implement RBP plans have achieved substantial savings, reducing healthcare costs by 5-20%.

Reduces claims spend substantially for clients

Clients get predictable outcomes

Enables providers provide fair and quicker payment

Ensures lower out-of-pocket costs for members

With traditional plans, employers usually have little control over employee healthcare expenses. It is mainly because of the varying price of any given service. With RBP plans, employers can win much of this control. 

How Does A Medicare Claims Repricing System Help in Reference Based Pricing?

Medicare claims repricing system is a solution for the payer to determine the multiple of Medicare rate they will pay for the services their employees or members receive. So, when an employee accesses healthcare and the provider submits a bill to the payer or self-funded employer, a SaaS-based Medicare claims repricing system like CMSPricer reprices the claim based on the multiple set by the payer. Besides repricing the Medicare claims, the CMSPricer repricing tool can also price all PPS types of institutional and professional claims including claim editing for Reference-based pricing. 
Contact Us to learn how CMSPricer can help you save huge on your company health plans.