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Referenced Based Pricing — Better Pricing for Better Healthcare

January 22, 2018 | Christina Bialas

Learn about the benefits of reference based pricing with a self-funding benefits planUp until this point, the major determining factor for healthcare pricing was location and competition, which highly favors the healthcare industry. To combat this one-sided trend, self-funding companies can use an approach called reference-based pricing. RBP is a health insurance strategy where employers set limitations on how much they will pay per medical procedure. Traditionally, employers either set a strict ceiling on pricing or use healthcare admins to negotiate pricing, rather than allowing providers to set pricing. However, it is not uncommon to see a hybrid of the two strategies as well.

The Benefits of Referenced Based Pricing

      1. Pricing
        Setting a ceiling for costs allows plan providers to take control of their healthcare spending. With a cap on expenses, employers can set limits and budget based on the highest possibility of the expenditures, and if costs equate to less, funds remain with the company. Additionally, negotiating costs lead to lower prices, which benefits employers and employees, creating a more profitable company as a whole.
      2.  No worries
        Limiting prices for procedures also remove the worry of exponential costs from employers and employees. Employers can rest assured knowing their employee benefits spending will not exceed their highest expectations. On the other hand, employees do not have to worry that medical procedures will exceed their coverage and increase their costs. Not to mention, improving employee wellness as employees are less likely to avoid a needed medical procedure.
      3.  High Standards in the Healthcare Community
        Except for reference-based pricing, location is the most significant factor in determining medical pricing. With RBP, healthcare competitors must stay-in-line with local pricing, as companies will direct their employees to companies whose cost are within their limitations. With observing eyes and open competition, healthcare providers in the same community must also keep providing exceptional service and pricing.


Learn more about self-funding with Varipro

Download our Smartsheet: What Is Reference-Based Pricing?


What companies need to know to implement Referenced Based Pricing successfully.

For employers to achieve an efficient RBP system, they must do their research first. RBPs are most efficient through the use of an experienced administrator, who is familiar with and well-connected to the local healthcare community.  Communication and planning are also crucial factors. Employees should be informed of all pricing limitations and directed to preferred healthcare providers.

If you would like to know more about implementing an RBP strategy within your employee benefits program, contact us today.