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Statistics Don’t Lie: Reference-Based Pricing Saves on Medical Bills

10/20/2021

5 Comments

 
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Reference-based pricing (RBP) is touted as the economical alternative to Preferred Provider Organization (PPO) pricing and statistics bolster that claim.

RBP is a reimbursement methodology primarily used by self-funded employers. Instead of carriers negotiating a fee directly with a provider (usually through a PPO network), employers reimburse providers and facilities according to a reference point – such as a percentage above of Medicare rates. For instance, Allied National’s self-insured Funding Advantage Freedom Plans reimburse physicians at 125% of Medicare and facilities at 150%.

The question many people have is whether RBP really can save employers and employees a significant amount of money on group health plan premiums and member out-of-pocket costs.

The answer?
Studies, such as the one shared by DirectPath indicates that employers that implement RBP plans have reduced health care costs by 5-20%.

How is that possible? Consider that the average self-insured plan using RBP pays 120% to 170% of Medicare. In comparison, RAND Corp. reported in May 2019 that the PPO prices paid to hospitals averaged 241% of what Medicare would have paid.

Advanced Benefit Consulting, an employee benefit consulting firm and health insurance agency, explains that a patient receives a 40% “top down” price in a traditional PPO. This is basically a discount from the “retail” medical bill price. However, if they have a RBP plan, they receive a “bottom up” plan, meaning that the plan starts at the Medicare rate and goes up. This is an important distinction. With a top down price, the rate could be astronomical and reducing the costs by 40% could have a negligible effect. And as retail prices go up, the value of the discounts lessen.

RBP plans save health plans money, help members save on their out-of-pocket costs and help stabilize costs for the long term by eliminating the inflation of retail medical bills.

If you’d like to learn more about Reference-based pricing, check out our other blogs!
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Allied National

Founded in 1970, Allied is one of the nation's oldest and most experienced third-party administrators. Allied National is a 90 Degree Benefits Company, a subsidiary of Blue Cross Blue Shield of Alabama. As the small group benefit experts, Allied works with small business employers to provide unique and affordable group health benefits.

5 Comments
Sherry HR
11/16/2021 11:24:13 am

Our RBP plan has been in place since April 2019. In our region (Horry County, SC) we have a great deal of difficulty using our RBP plan. Our covered employees are told by many doctor's offices, labs, and medical facilities "... we don't or won’t accept "
In our region we need boots on the ground from the carriers to educate/on-board medical providers and facilities, so RBP plans are understood.
I agree that RBP is smart, but our employees typically drop coverage at renewal due to their experiences of up front (in some cases, retail) charges and the burden of processing their own reimbursements.
Frankly, all anyone wants when in need of medical attention is to just present the coverage card and know that claims are filed by the provider and that the claim will be adjudicated fairly, and quickly so final share of responsibility is satisfied.


Reply
Gary Ashley
11/16/2021 02:23:00 pm

Thanks for your comments. RBP faces two common problems: 1) providers sometimes don't recognize a plan that doesn't have a PPO logo on the ID card. We solve that with instructions to providers to call our Elite Support Team to explain the details of the plan. Overwhelmingly this solves acceptance; and 2) sometimes providers push back on RBP reimbursement. We're always ready to negotiate a fair reimbursement with any provider, both for current members and any future bills that might occur.
It is a learning and education process for both our members and for providers. The result is reduced costs for our members in monthly premiums and their out of pocket, something our members tell us in their number one concern with their health plan. .

Reply
masonry restoration contractor link
3/24/2023 11:13:39 am

I'm interested in this. Will gonna check out other blogs.

Reply
Gutter Contractors Victoria, BC link
9/27/2023 08:17:39 am

Wow, this content is a game-changer! It provided me with a fresh perspective on the subject.

Reply
Gateway fences link
2/6/2024 02:46:51 am

This article breaks down reference-based pricing (RBP) in a super clear way. The stats they share about RBP saving 5-20% on healthcare costs are legit impressive. Plus, the explanation of how RBP starts from Medicare rates and works up is eye-opening. Definitely worth a read for anyone trying to make sense of healthcare expenses! 🙌

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