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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.


Alliant note and disclaimer: This document is designed to provide general information and guidance. Please note that prior to implementation your legal counsel should review all details or policy information. Alliant Insurance Services does not provide legal advice or legal opinions. If a legal opinion is needed, please seek the services of your own legal advisor or ask Alliant Insurance Services for a referral. This document is provided on an “as is” basis without any warranty of any kind. Alliant Insurance Services disclaims any liability for any loss or damage from reliance on this document.