By Ellen Winson, Policy Administration Specialist
Employers are continually looking for ways to control medical costs. This is especially true for self-insured employers. One strategy that has emerged is the implementation of Referenced-Based Pricing (RBP).
With RBP, the employer sets a maximum reimbursement tied to a particular benchmark. The amount that providers bill is arbitrary and can vary greatly. The billed charges may not have a relationship to the actual cost of the procedure, nor may it be a reflection of the market value of the procedure. A universally accepted benchmark cost is the Medicare negotiated price; however, this pricing only has minimal margins for providers. With RBP, the employer agrees to pay the Medicare negotiated prices plus a percentage to better satisfy providers.
RBP is all about transparency. Traditional models of pricing rely on a non-transparent contracting process by which networks negotiate discounts off of prices which may, at times, be over-inflated. Utilizing RBP, employers instead pay health care providers directly, which eliminates the insurance carrier as a “middle man” and provides more clarity and value in pricing. As out-of-pocket costs rise, employers and employees become more interested in information on the cost of services because they may be paying for services themselves.
Some advantages to RBP include more efficient administration, better understanding of costs, elimination of network costs, and lower medical benefit expenses to the employer. Understanding the costs of healthcare services allows employers to identify lower cost options and more accurately project healthcare spending trends. To successfully implement RBP, employee education and assistance is essential. Employers will need to inform employees how RBP works, what will be reimbursed, cost-saving alternatives available to them, and what support services they can utilize.
RBP can reduce healthcare costs for both the employer and employee, but there are several different models offered by numerous vendors. RBP may not be an ideal solution for every employer, and it is important to find the right model for a particular employer. Education is key. Roundstone can provide information, consultation, and guidance in this area. Talk to your advisor or contact one of Roundstone’s sales representatives to learn about how RBP can work for you and your employees.
Ellen Winson, Policy Administration Specialist
I have been with the Roundstone Policy Administration staff for almost four years. I was previously a Senior Actuarial Analyst and Defined Benefits Administrator for more than thirty years, handling benefits calculations, valuations, and plan terminations for groups ranging from one person to over ten thousand. My responsibilities at Roundstone are centered around our policy/contract administration, ensuring that our clients’ proposals and policies are issued in a timely and accurate fashion. On weekends, my husband and I own and run a candy store and general market in Marblehead, Ohio called The Candy Junction and Lighthouse Market. I am also a Lifetime Girl Scout, Girl Scout volunteer, and planner for River Valley Day Camp in LaGrange, Ohio.