Reference Based Pricing Explained: Let’s Take a Look Around
With the continuous rise of healthcare costs, employers are searching for new ways to reduce those costs, without compromising healthcare quality for their employees. It drives them to explore and adopt viable strategies to mitigate the impact. One of those strategies, which is not so new but gaining in popularity as a cost containment strategy is Reference-Based Pricing.
What Exactly is this Reference-Based Pricing?
Reference-Based Pricing (RBP) is a strategic alternative to the Prospective Payment System (PPS), replacing High Deductible Health Plans (HDHP). Self-funded employers utilize the RBP method for their group benefit plans.
RBP method typically doesn’t involve a traditional insurance carrier or provider network negotiating the covered healthcare service plan. Instead, employers set a fixed limit on the amount of a plan that will pay for certain healthcare services.
How Does Reference-Based Pricing Work?
RBP comes in more than one form, basing the reimbursement amount on some types of Medicare-based rate, cost of charges or percent of savings. Employers set a fixed healthcare plan limit, based on a multiplier or percentage of what Medicare would pay the network provider.
The concept is to eliminate the reliance on provider network discounts that are obtained through the application of a percentage of Medicare or other reference based repricing mechanism. The most common method is the use of Medicare as a benchmark for recommending network provider payment. It is the most recognized reference based repricing tool.
Upside of Reference Based Pricing:
For employers, the Medicare Plan savings can be dramatic, especially when the entire replacement option is chosen. Instead of network savings, which tend to range from 20% to mid-40%, they can make a saving of 50% to over 70%, depending on the baseline percentage of Medicare used for payment recommendations. In addition, the member can make significant savings, because these reductions can impact applicable deductibles, coinsurance, and copays.
The objective is simple, which is to address healthcare costs for individual employees and employers and to provide an effective tool to help stabilize the healthcare cost. Reference-Based Pricing strategies tend to differ, based on the parties involved, who could be TPA, self-funded employer, etc. and their preferences.
Difficulties of Managing Reference Based Pricing:
- Need to work with the applicable stop-loss carrier
- Identify providers and convince them to accept proposed RBP rates
- Consider variations in employer risk tolerance
Is Reference-Based Pricing a Good Option?
The answer to this question is multiple, depending on factors. The first factor is – the employee base. The employee base of a certain employer organization is important. For example, a young and healthy technology startup may not benefit much from RBP, because that may have fewer large claims that require significant cost-savings. On the other hand, a group in an organization with older or less healthy individuals may benefit more on a day-to-day basis.
Factor number two is employee buy-in to make the switch option. RBP restructures the very concept of health insurance that has always been so familiar to the most employees. It can make changes to plan costs, contributions and possibility of balance-billing.
Should RBP be Used for All or Only Certain Claims?
Reference Based Pricing is not an all or nothing concept. There are so many options, such as using RBP for all claims, for only facility claims, for only out-of-network claims, and the likes. Individual healthcare plans factor in those options and select what makes the most sense for them.
How Is Reference Based Pricing Calculated?
Healthcare plan providers use Medicare claims repricing tools to analyze and price plans. They are to weigh employers’ requirements on one hand and to ensure compliance with the CMS policies and rates at the same time.
As CMS policies and rates tend to update frequently, ensuring compliance with them manually is next to impossible. That is why providers use Medicare claims repricing tools that can reprice all PPS types of institutional and professional claims, including claim editing for Reference Based Pricing.
Medicare Claims Repricing Tool:
You may get to find a number of these Medicare claims repricing tools. But, a few of them have those features that can make your repricing tasks hassle-free and ensure complete accuracy and compliance. One of those tools is certainly CMSPricer, which is a SaaS-based Medicare claims repricing tool and provides complete solutions for pricing of all PPS types of Institutional and Professional claims including claim editing for Referenced Based pricing.
Benefits of CMSPricer:
- No software to install, cloud-based accessibility
- Easy and quick to import/export claim files for repricing with custom interface
- You needn’t to enter any complicated contract
- Guaranteed accuracy for claims processing
- Easy manual, batch or EDI claims entry
CMSPricer can meet stringent CMS Medicare claims accuracy requirements for reference-based pricing and auditing claims from over 50 Medicare Advantage plans. Using the CMSPricer SaaS based tool and interface will allow you to effectively batch process with ease and precision.To know more details of this SaaS-based Medicare claims repricing tool, visit at https://cmspricer.com/