You’re probably going to begin hearing about “Referenced Based Pricing” for group health insurance plans. And for good reason – it could be a great way to save a lot of money on healthcare (and health insurance) costs.
The entire point of a provider network is negotiated pricing. An insurance company contracts with hospitals and other medical providers and agrees to a fee schedule for services for that company’s policyholders. Reference-based pricing eliminates this practice. A plan utilizing this model allows members to visit whatever provider they’d like.
How are Reference-Based Prices Set?
The “reference” in reference-based pricing is the Medicare rates. (Medicare is the government’s healthcare program for those 65+). A reference-based pricing system pays a percentage of the Medicare rates for various services.
For example, a plan may set reimbursement rates like this:
- 130% of the Medicare rate for office visits
- 150% of the Medicare rate for in-patient hospitalization
- 130% of the Medicare rate for out-patient services
You get the idea.
What’s the Point of Reference-Based Pricing?
The main goal in using a Reference-Based Pricing plan is cost. Medicare rates are a lot lower than most network plan reimbursement rates. So paying those rates results in a lot of savings. And that savings is reflected in your monthly premiums.
In fact, the plan we market to small groups will result in savings of around 20% or so when compared to the same plan with a traditional network.
When used in a self-funded or partially self-funded plan, you’ll have the additional benefit of saving money in your claims fund, which can make a big difference.
A Common Objection: What About Balance Billing?
Astute readers might say, “If hospitals are used to accepting a lot more, and I show them an insurance card that’s using these Medicare-base rates, will they make me pay the difference?”
Great question. Imagine this scenario using completely made-up numbers:
- Procedure X is $100 with Medicare.
- A referenced-based price plan that pays 150% of Medicare rates would pay $150 for Procedure X.
- But… the contracted price for Procedure X with most network plans is $200.
Does that mean that, after the hospital collects $150 from the insurance company, they’re going to bill you the remaining $50 to get them to the $200 price they’re accustomed to receiving?
That is a possibility. The company whose plan we recommend eliminates that concern by paying any balance bill claims directly. If a member received a balance bill, they would be submit it to the insurance company, who would take care of it.
How Can I Get a Health Insurance Plan with Reference-Based Pricing?
We’d be happy to show you some options for a plan with reference-based pricing. There’s a small learning curve for employees, but we’ll make sure everything is clear and user-friendly. And everyone will love lower prices.