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Reference-Based Pricing: Antidote to Rising Healthcare Costs

Healthcare costs in the United States are rising each year. Recent projections from the Centers for Medicare & Medicaid Services[1] estimate that by 2026, nearly one in every five dollars spent in the United States will go to healthcare. What are we willing to do about it?  As a broker, health plan administrator, HR or Finance professional, we’re already working every day to keep costs under control, but is there more we can do?
What if there were a way to pay providers a fair price for their services, one tied to actual costs of treatment, rather than a price based on how much the patient’s benefits will pay out?  Sounds reasonable, right?

Reference-Based Pricing: An Overview

Historically our industry has focused on negotiating the best possible discount for goods and services from healthcare providers. Preferred Provider Organization (PPO) plans ensure that members get discounted prices from providers, but sometimes that price may still be above market value.
A reference-based pricing model arrangement, on the other hand, involves paying the hospital or doctor the fair market cost, along with an agreed upon margin, which may be based on a multiple of Medicare. This approach gives members the freedom to go wherever they want for treatment, rather than sticking to a network. Reference-based pricing helps brokers pass on the best possible deal to employers so that they can pass on the savings to their members. The model also helps to lower costs for employers with self-funded plans, and may lead to lower out-of-pocket costs for members covered by High Deductible Health Plans.

Member Education

At CoreSource we recognize that reference-based pricing is very different from the PPO models that most members are used to, and in order to make these models work effectively we need member support and buy-in. Depending on the health benefit plan design, members may now be balance billed for costs incurred above and beyond the fair market cost as determined by our models. Member education is key to alleviating any pain points that come from this change.

Before seeking healthcare, members need to be aware of their available provider options and the relative costs associated with each. Tools such as Healthcare Bluebook can help members avoid high-cost providers when possible.

After the fact, members who are balance billed by their providers may get the support of a trusted advocate who will attempt to negotiate the balance bill on the member’s behalf. Knowing if that protection is available, and when to use it, will help members to keep out-of-pocket expenses down.

More Cost-Saving Tools

On its own, reference-based pricing does not provide the proverbial silver bullet for employers and must be paired with other options. At CoreSource, we’ve found that when our members are better connected, they are better equipped to manage their health and health-related expenses, which translates to lower overall costs for our clients. To that end, CoreSource developed a digital toolbox with resources to foster member engagement.
  • DSS – Combines telemedicine with cost and quality transparency tools, backed by an ROI guarantee*
  • myCoreSourceWire – Delivers vital messages and updates directly to members’ phones
  • myCoreSource Mobile App – Offers employees quick access to their benefit ID card, claim information and more
  • myCoreSource Online Portal – Makes it easy to navigate so members can see more of what they need faster
At CoreSource, we believe that these tools empower members to make good, informed choices for their healthcare, just as reference-based pricing allows our clients to keep costs for goods and services from spiraling out of control. By educating members about these tools and the options they have, brokers and employers can help make reference-based pricing models effective without shifting too much of the financial burden to members.

Contact us to learn more.

*Certain qualifications apply to ROI guarantee

[1] Centers for Medicare & Medicaid Services. “National Health Expenditure Projections 2017-2026.” 2018.