During my 30+ years in the benefits business one thing has remained constant, change. What has remained the same is continued cost increases in healthcare and as a result in rates. My issue has always been with the fact that we as consumers in the healthcare industry have never really been consumers in the true sense of the word. How many individuals that you know have ever asked their provider or facility the cost of a procedure prior to having it done, telling the provider they are going to “shop” for the best price? None of us think twice about having researched car prices prior to heading to a dealership and wheeling and dealing with the salesperson until we feel we have squeezed every last dollar out of the price. The price of a surgery is comparable to that of a vehicle, or more but we do not even think to negotiate, maybe it is time to start-
At the very root of the healthcare crisis in the US is the lack of transparency, which is by design, most in the industry want to keep consumers in the dark. Part of the problem is being addressed by a method called reference- based pricing. It is a pricing mechanism that actually targets the billing system, the system that most of us never get to see until we see the end product, our explanation of benefits.
We all believe that by going to our network provider we are getting the best deal out there, after all we are being told by our insurance carrier to stay in network because they have done the negotiations for us. While the networks have performed their magic and obtained sometimes up to 50-60% off of retail billing, the cost is still significantly higher than what Medicare pays for the same service. In some instances up to double or triple the cost.
Reference based pricing allows the employers to pay for medical services based on a pre-determined percentage of Medicare reimbursements rather than a percentage discount negotiated by the PPO. It is becoming increasingly more popular as more employer organizations consider the move to this type of transparency and as they move from fully insured to self funded programs.
As with any self funded plan, there is always risk, and with the added reference based pricing component you need to be working with an organization that has experience to ensure your employees are not balance billed. Reference-based pricing is a forward thinking way to manage costs while providing a way to improve cost transparency and to mitigate the cost of delivery of healthcare. If you would like to know more, please feel free to give us a call.
Sharon N. McReynolds