Healthcare costs continue to rise, and for many employers, managing these expenses without compromising employee benefits is becoming challenging. One innovative solution to help cut costs without cutting benefits that is gaining traction is Reference-Based Pricing (RBP). But what exactly is RBP, and how can it help your company reduce costs?
What Is Reference-Based Pricing?
Reference-Based Pricing is a health plan strategy where the employer (supported by a TPA like Personify Health) pays a set price for specific health care services instead of negotiating prices with providers. They set a maximum payment amount for medical services based on a “reference” price, typically tied to a benchmark like Medicare rates or another transparent pricing standard. When a provider bills for the service, the payer will apply the RBP price.
For example:
- If a hospital charges $10,000 for a procedure, but Medicare pays $4,000, an RBP plan might reimburse $5,000 (125% of Medicare).
- This approach ensures employers and employees aren’t overpaying for care.
Why Traditional Health Plan Pricing Falls Short
Most traditional health plans rely on network discounts, which sound appealing but often mask the reality: hospitals start with highly inflated prices, then apply a “discount” that still leaves costs far above fair market value. Employers end up paying more than necessary, and employees face higher premiums and out-of-pocket costs.
How RBP Saves Money
- Lower Claims Costs
By tying payments to a transparent benchmark, RBP can reduce claims expenses by 25–30% compared to traditional PPO plans or equivalent to $2,000-$4,500 PEPY
- No Network Restrictions
Employees can visit any provider willing to accept the reference price, often expanding access to care.
- Improved Cost Transparency
Employers know exactly what they’re paying for services, eliminating the mystery behind hospital bills.
- Reduced Premiums
Lower claims costs often translate into lower premiums for both the company and employees.
What to look for when looking for a TPA
- Employee education: Employees need clear communication and support to navigate this model.
- Strong advocacy: Partnering with a vendor that provides patient advocacy and legal support is essential.
- Clinical integration: For steerage to friendly providers and negotiations with providers directly.
- RBP-dedicated member services: Quality, well-staffed team that can navigate provider negotiations on behalf of members.
- Simple navigation for members: Single point of entry for members to resolve inquiries.
Is RBP Right for Your Company?
If your organization is struggling with rising healthcare costs, RBP could be a gamechanger. It promotes fairness, transparency, and cost control, without sacrificing quality care.
Reference-Based Pricing is not just a trend; it’s a strategic approach to rein in healthcare costs and protect your bottom line. With the right partner and communication plan, your company can save money while empowering employees with greater choice and transparency.
RBP Cost Savings with Personify Health in Action
