Reference-Based Pricing Approach Often Reduced Employers’ Healthcare Spending By 20% To 30%

Reference-based pricing in its simple terms is the concept that an employer or health plan may decide an exact dollar amount that a benefit plan might cover for a particular service or procedure. It is sort of the defined contribution approach around procedures or medicare care. 

So, for example, today if someone gets a test performed or has surgery, sees a provider, or a hospital has what they charge. The insurance company typically has a discounted amount that they have negotiated with that provider and then the discounted amount is reduced off on what the physician or hospital would usually charge and that becomes the amount that is eligible for benefits. 

In a reference-based pricing model, an employer, a health plan, a plan sponsor, an insurance company might say for that particular procedure the insurance plan will cover a blank dollar amount, say $5000 if the procedure costs more than that then the consumer will have to pay that additional dollar amount, but this is the amount their insurance will pay and provide. That’s why it is much more important for providers, hospitals, physicians, and patients to really get their arms around and understand what these potential reference-based prices might actually mean in the marketplace.

It’s difficult for employers and plans sponsors and health plans to carefully and easily identify what should be reimbursed for each of these various procedures. But we think we’ll get there and when it’s done, it will become much more transparent and direct for an employer to say if you are having knee replacement surgery, this is the amount that the insurance plan will cover and provide it will force the consumer the patient to be much more judicious about where they go to get those procedures performed to ensure that they don’t have more out-of-pocket expense. 

There are some real key issues that also need to be taken into consideration, which are quality, and efficacy making sure that there is not any reduction in the quality of care being delivered in order to get the right price. 

So, reference-based pricing is also viewed as a perfect take taking into consideration the wide variation in prices among states. Based on the findings, employers design coverage using RBP contracts, based on a multiple of Medicare. 

Unlike traditional preferred provider organization (PPO) coverage, an RBP model typically has no in- and out-of-network payment procedures. You can go anywhere you choose for service, and the plan will pay the provider a fair and reasonable amount based on Medicare plus a percentage. This is a profitable arrangement for a physician, hospital, or other facilities.

Get Control Over Cost

The RBP approach allows employers to negotiate contracts with physician practices and hospitals. These providers may balance bill the patient for what the provider considers the remainder of its fee. The consumer patients (here the employees) need to immediately contact the plan TPA who will intercede with the provider. 

With health plans using RBP, physicians are typically paid fees for their services on par with what they receive from a standard health plan. The big savings come from care received at hospitals and other facilities.

Get All or Certain Claims

The RBP model is not designed with an all-or-nothing approach. There are several options, such as utilizing reference-based pricing for all claims, for only facility claims, for only out-of-network claims, etc. Employers need to weigh their options and select what makes the most sense for each of them. 

In short, in contrast to the traditional healthcare plans, the RBP approach is designed to limit disruption and direct care to fair-price facilities, thereby saving employers’ spending through transparent pricing and proper member guidance.

How does a CMSPricer Enable TPAs to Streamline Their Processes?

CMSPricer, a SaaS-based Medicare claims repricing system, is built to support TPAs to provide in-house RBP, based on CMS Medicare rates and provide their clients with an option of Medicare allowable rates at 100% and configure any variance percentage of that rate, including claim editing for Referenced Based pricing. TPAs can streamline their process of calculating the percentage of Medicare allowable fees for both providers and facilities.

To get all the facts, connect with the CMSPricer provider