Plans that implement reference-based pricing (RBP) set a maximum amount payable for specific procedures. Higher-than-normal cost sharing applies for providers charging above reference price. Employers using or considering RBP need to stay on top of ACA rules and guidelines to avoid potential compliance problems:
- The ACA set limits on out-of-pocket expenses for non-grandfathered plans ($6,600 for individual coverage; $13,200 for other than individual coverage).
- An FAQ issued on May 2 indicated that a large insured or self-insured group using RBP would not be considered as failing to comply with the out of pocket limits as long as the plan uses “any reasonable method” to ensure adequate access to quality providers.
- The new FAQ specifies factors to determine if the use of RBP is “reasonable,” which would presumably allow the plan not to count costs beyond the RBP against the out-of-pocket maximum.
So what do employers need to keep in mind with RBP to keep it “reasonable”?
- Type of service: Plans must offer the member sufficient time to make an informed choice of provider after the need for care has been identified; RBP cannot be applied to emergency services.
- Reasonable access and quality standards: Plans must have an adequate number of providers that accept the RBP and ensure those providers meet reasonable quality standards.
- Exceptions process: Plans must establish an exceptions process that is easily accessible by members.
- Disclosures: Plans must automatically provide information about the pricing structure, a list of applicable services, and the exceptions process. Upon request, plans must provide a list of providers that will accept the RBP, a list of providers that will accept a negotiated price above the RBP and the underlying data used to ensure an adequate number of providers who accept the RBP meet reasonable quality standards.
More employers are using RBP — should you?
According to Mercer’s survey data, in 2013, 10% of large employers (500+ employees) used reference-based pricing, and 22% were considering it. This strategy is more common among larger employers, and that’s where we’re seeing growth. Among employers with 10,000 or more employees, 15% used reference-based pricing in 2013, up from 10% in 2012. An additional 30% say they are considering it.
Why all the interest in RBP? There is huge variation in cost for some medical services from one provider to the next. Worse, most often patients don’t know how much a service will cost even when they are at the doctor’s office — they find out only when they receive an explanation of benefits (EOB) in the mail weeks after the care was provided. RBP provides an incentive to the consumer to review pricing information in advance and to select a provider accordingly. Employers typically start off with a short list of services/procedures for RBP and expand as members gain experience with the approach and learn to use tools to support decision making. Services where we see great cost variation without much variation in quality — like an MRI — are often the focus of an RPB strategy. And a side benefit of RBP is that, once it has been introduced in a community, you often see the highest-cost providers lowering their prices so they don’t lose business.
RBP is all about transparency, an issue of growing importance to both employers and employees, who, as out-of-pocket costs rise, are more interested in information on the cost of services because they may be paying for it themselves. The market is responding to the new demand. There are now several specialized vendors providing this service and most insurance companies have built (or contracted for) a tool.
This makes it easier for employers pursuing RBP to meet the requirements for providing a “reasonable method” for finding and accessing quality providers. Transparency is not just about the price. Many of the transparency tools also include access information and some type of quality indicator. A best practice would be to pair pricing transparency with medical decision support, to convey the message to employees that now that they know how much the treatment costs, they might be interested in knowing more about alternatives to consider.
Best-in-class transparency tools can also alert members to cost-saving opportunities without them ever needing to initiate a search, and even target messaging based on member searches. For example, a member who searches for information on pregnancy would receive maternity management program pop-ups. Reminders about employer-specific programs (health assessments or onsite/near-site services, for example) can be sent as well.
I will be interested to learn if employers think the most recent FAQ on “reasonable” application of RBP is supportive of medical management and consumerism techniques — or viewed as an additional constraint that makes the effort less worthwhile. For employers in the latter camp, I would encourage at least looking into transparency tools to see if they can smooth the way.