Reference-based Pricing - What’s it All About?

1. Reference-based Pricing - What’s it All About? Self-funding is an affordable alternative to provide group health benefits to employees. Be it small, mid or large- size firms, a significant number of them are turning to self-funding plans for the many advantages they offer. When we talk about a self-funded plan, reference-based pricing is one of the popular methods to price-claim options in the plan. In this blog post, we discuss reference-based pricing in detail. Understanding Reference-based pricing Reference-based pricing, also referred to as RBP, aims at reducing the claim spends of employers. It empowers the employer to get better control of the cost of claims with ‘bottom up’ pricing. The pricing includes hospital stays, surgeries and other treatments that have a high-fee, and are often the costliest expenses in a medical bill. How does it work? There’s often a large discrepancy between what healthcare establishments charge for the care and the amount that is paid by the insurance provider at the time of settlement. Insurance companies show this difference as the saving that they will be offering to the employer for buying group insurance. The employer sees the saving, but disregard the high amount they will be shelling out to buy the insurance plan. In a reference-based plan, the employer will decide the maximum amount they will pay for the claim. Though there are variations in payment systems, most reference based pricing vendors provide reimbursement based on the amount paid by Medicare along with a specific percentage. Benefits of reference-based pricing ● Cost transparency is one of the most significant advantages of reference-based pricing. It gives employers a better control over soaring healthcare cost without letting it hurt their bottom line. Another advantage of reference-based pricing is that it lets you know the price of a particular treatment. When organizations sign an agreement with in-network healthcare facilities, it is ensured that all the costs are covered at the decided price. If an employee seeks treatment from an out-of-network healthcare facility, they might have to pay a certain amount from the bill out of their pocket. ● ● ● Final Words Reference-based pricing enables organizations to save more on their healthcare expenses, and this benefit can be passed on to the employees. Moreover, the employer isn’t bound to pay an exorbitant amount for a medical service it could have received at a lower price. When your organization has decided to go with reference-based pricing, make sure you turn to a reputable healthcare solution provider for self-funded firms.