Referenced-based pricing (RBP) is not a new pricing model concept, but a new form of RBP has been creating quite the buzz with employers over the last year. As recently as October 2018 we talked with employers about the evolution of this model - and the increased risks associated with it. While the first employers to experiment with RBP tended to be very large employers (5,000 or more employees), the newer form is most often pitched to mid-sized employers (500-4,999 employees) willing to take fairly drastic steps to reduce cost.
We discussed the differences between the two forms of RBP - reference-based benefits vs. reference-based reimbursement - in our recent webinar, Considerations for the New Evolution in Referenced-Based Pricing Models. As the comparison below illustrates, reference-based reimbursement offers greater potential savings because it applies to more services - but can leave plan members open to balance-billing.
The Difference Between Referenced-Based Benefits & Referenced-Based Reimbursement
|Referenced-Based Benefits||Referenced-Based Reimbursement|
If you’re looking for a steep reduction in overall medical cost and you offer an open-access network through a national carrier, it’s worth considering a referenced-based reimbursement model. Start by weighing the potential positive results against the potential pitfalls.
Potential Positive Results
The level of savings will depend on factors such as geography, facility utilization and professional fees. This newer approach most definitely disrupts the provider and carrier status quo, but the potential for balanced billing and employee dissatisfaction runs high. If you’re thinking about giving the referenced-based pricing approach a serious (or another) look, be sure to cover your bases with vendors, be thorough in your claims history knowledge and work closely with your legal counsel on compliance issues. To get you started, here is a short list of questions you might ask your vendors:
For more on compliance questions and some important issues arising out of recent lawsuits, check out the webinar replay – which also features a case study of a mid-sized employer that we helped to achieve a 15% reduction in paid costs in year one.