Is Reference Based Pricing Saving Money?

healthcareWhen the independent think tank finds that on average, prices paid to hospitals by younger, healthier policyholders were 100 percent higher than what Medicare would have paid for the same procedures, it’s easy to understand the impact that payment contracts based on what Medicare pays can have on health plan costs.

In contrast to traditional fully insured plans, self-funded health plans with reference based pricing (RBP) enable consumers to learn the cost of treatment before they receive it. This is the advantage of basing provider payments on publicly available cost and quality data rather than arbitrary network discounts. And because Medicare varies its pricing by geographic region, providers are compensated fairly, and medical price inflation can be controlled.

From Big to Small

While very large employers were early adopters, the model is becoming far more commonplace among smaller groups that partially self-fund. TPAs are helping some of these plans realize overall savings in the 20 percent range and for a plan with 300 members, this can mean annual savings of $1 million or more.

In a marketplace that has lacked transparency and accountability for far too long, Medicare reference is proving to be not only a market disruptor, but an approach that can help employer-sponsored health benefits thrive. Contact us if you want to learn more about how a RBP plan could work for you.

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