Is Reference-Based Pricing a Cost-Cutting Tool for Employers?

Cost-caps for health plans are gaining popularity. A relatively new solution to controlling health plan expenses, Medicare reference-based pricing (RBP), has been buzzing among employers and advisers alike.

Referral-based pricing from Medicare lets employers save too, allowing them to control short- and long-term health care costs. In spite of all the buzz about reference-based pricing, some employers don’t really understand how it works.

To convince them to switch, let’s explain how RBP works.

Referral-Based Pricing: What is It?

Health plans with reference-based pricing cap their payments to providers for covered healthcare services. Clients are able to select relatively low prices for treatment by selecting a cap, or an allowable amount, based on a reference point, such as Medicare reimbursement.

Medicare Claims Repricing System

A RBP Differs from a Traditional Health Plan in Several Ways

Generally, reimbursements for indemnity plans do not have a network and are calculated based on the percentage of average usual, customary, and reasonable rates (UCR). As insurance carriers contract with providers, they negotiate significant discounts on services when offering network-based health plans. A certain percentage of the R&C and UCR reimbursement is divided between the insurer and the participant.

A Primer on Reference-Based Pricing

  • Medicare plus 50% is paid to physicians
  • Medicare + 50% is paid to facilities and surgical centers
  • An appointment setting service and concierge facility for surgeons
  • Choosing providers based on steerage will result in no copay or deductible for members
  • Medicare claims repricing system calculates legal protection for balance bill members

What are The Benefits of Reference-Based Pricing?

Employers can save money with RBP. There are several types of RBP plans, depending on the employers’ needs. There is typically a markup between 120% and 170% on Medicare reimbursement rates for RBP plans using Medicare as their benchmark. In contrast to negotiated discounts with insurers, hospitals are seen billing employer plans for 250% of Medicare reimbursement. This has resulted in employers saving between 5-20% on healthcare costs through RBP plans.

Provides Clients with Substantial Savings on Claims as Follows:

  • Predictable results for clients
  • Provides fair and faster payment to providers
  • Reduces members’ out-of-pocket expenses

Using RBP plans, employers can gain a great deal of control over employee healthcare expenses. This is due to the varying prices for each service.

How does the Medicare Claims Repricing System Work?

Payers use Medicare claims repricing to determine how much they will pay for their employees’ or members’ services based on the Medicare rate. Therefore, a SaaS-based Medicare claims repricing system like CMSPricer reprices Medicare claims based on the multiple set by the payer when an employee accesses healthcare. In addition to repricing Medicare claims, CMSPricer can also price all PPS types of institutional and professional claims, including reference-based claims.

Find out how CMSPricer can help you save money on health insurance for your company.