Reference-Based Pricing: A Path Back to Health Plans Without Networks

Referenced-based pricing (RBP) is a noteworthy strategy to control cost and drive an aggressive level of consumerism. Health Affairs recently published a study that not only looked at the experience of several programs using RBP, but estimated the potential savings across all commercial plans – an exercise that supports Mercer’s vision of an employer-led transformation of the US healthcare system. RBP squarely targets waste in the system by changing the typical structure of incentives, where a plan member meets a deductible up front but then has little reason to seek lower-cost providers. To quote the study authors, “Reference pricing embodies a “defined contribution” approach to consumer cost sharing, with the employer or insurer guaranteeing the patient access to care while the patient assumes financial responsibility for his or her choice between high- and low-price alternatives.”

The employers in the paper are very large and initiated their own RBP programs, which many employers would find a daunting proposition. However, a growing number of carriers have some capabilities in this area. Find out if your does -- if they don’t, they will now know you’re interested. As you work with vendors to advance your value-based care strategy, referenced-based pricing should be part of the thought process.

Depending on your age (if it’s up near mine ☺) you might remember that at one time health plans had scheduled benefits with very specific payment amounts for medical services. Referenced-based pricing could also be used to support a strong corporate commitment to consumerism. Some considerations:

  • By scheduling or setting prices, a plan can control one component of trend: unit cost.
  • You could eliminate the need for a network, or at least limit the complete scope of a network.
  • Quality and transparency data would be an absolute necessity for plan participants to navigate this type of plan.

But if you’re interested in learning more about this new old strategy, stayed tuned for a follow-up post on innovative players in this space that could make RBP feasible for a broader range of organizations.

Eric Bassett
by Eric Bassett

Senior Partner, Mercer

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