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Reference-based pricing (RBP)
It is a healthcare payment model where health plans, typically via a third-party administrator, pay providers a set, predetermined amount for a service, often based on a benchmark like the Medicare rate plus a fair profit margin
This strategy aims to control costs (and in HCG's experience, it accomplishes this incredibly well) by setting a ceiling on payments, unlike traditional plans that rely on discounted, negotiated rates from a provider network. While RBP will lead to savings and empower consumers, if an employer works with an inexperienced broker and TPA, it may result in providers billing members for the remaining amount, a practice known as balance billing. HCG works with a very experienced RBP vendor who manages this issue incredibly well. In ten years of working with them, we have never had a balance billing issue related to an RBP paid claim.
How it works
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Sets a payment cap: The plan establishes a set price for a medical service, typically calculated by taking a benchmark price (like the Medicare rate) and adding a reasonable profit margin.
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Provides provider choice: Because the plan pays based on a set price rather than a pre-negotiated network, members can seek care from any willing provider.
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Reduces inflated costs: RBP protects against inflated hospital chargemaster prices and promotes transparency by basing payments on a benchmark.
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Manages balance billing: If a provider is dissatisfied with the RBP payment, they can attempt to bill the member for the unpaid portion. It is crucial for employers to partner with experienced administrators who can handle these balance billing issues. HCG already has those partners ready to work with you.
Potential benefits
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Cost savings: RBP can lead to significant savings for both employers and employees.
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Increased transparency: The model is more transparent than traditional plans because the "fair" price is based on a benchmark.
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Consumer empowerment: Employees can become more active and informed about their healthcare choices and costs.
Potential downsides
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Administrative complexity: Implementing and managing an RBP plan requires careful administration to handle provider negotiations and member education. HCG has more experience with establishing and managing these plans than whoever you are currently working with.
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Balance billing: Some providers may balance bill members for the difference between their full charge and the RBP payment. HCG's preferred vendor manages the negotiation so that this doesn't happen. Also, even if this did happen in a one-off situation, the employer will be saving so much money versus other options that the employe can easily afford to pay that balance bill for the employee. HCG has clients who have saved millions over five to ten year periods while regularly receiving 0% renewal increases. We have references ready to provide you who will confirm this.