Exploring a Reference-Based Pricing Model?

By Alliant Employee Benefits

As employers look for new ideas to help them contain healthcare costs, many are reviewing a reference-based pricing methodology (also referred to as defined benefit arrangements, value-based payments, reference-based reimbursements, and others). Essentially, it is the practice of tying the allowed amount for a claim payment to a multiplier of a baseline payment level (e.g., Medicare). With the savings potential range averaging $600-$1,600 per member per year (15-40%) of total medical cost over a PPO model (depending on region, design, vendor, and more), it’s no surprise this methodology is causing a stir.

If your organization is exploring a reference based pricing arrangement, here are three key elements to consider:

Education: These designs are more disruptive to a population than traditional PPO plans. A well thought out education program for executive leadership, management, employees and their families is vital to sustaining the savings impact of a reference-based pricing program.

Partners: The selection of partners who are integrated and experienced in offering a reference-based pricing model is critical. From consultants, TPAs, overlay networks and pricing vendors; each one plays an important role in the overall success of a program and the employee experience.

Design: A reference-based reimbursement program should align philosophically with your benefits strategy. There are many options to choose from in how a plan is designed. Determining the appropriate design for your culture, in addition to ensuring protections with plan and stop loss language, are essential to a successful program. 

The nuances matter here. If you’re exploring a referenced-based pricing model for your organization, an Alliant representative can help you uncover the hidden details you’ll need to be aware of. Alliant is here to support you.

Disclaimer: Alliant Insurance Services does not provide legal or medical advice or legal or medical opinions. If a legal opinion is needed, please seek the services of your own legal advisor or ask Alliant Insurances Services for a referral. Alliant Insurance Services disclaims any liability for any loss or damage from reliance on this document.