As healthcare costs continue to rise, brokers and TPAs across the industry are exploring innovative solutions to provide clients with quality care at reasonable prices. Among these solutions is Reference-Based Pricing (RBP), a potent strategy for payers, including employers and plan sponsors, to effectively manage costs. Here, we will answer what is reference-based pricing, its importance, impact, and more.
What is Reference-Based Pricing?
Reference-based pricing is a healthcare payment model that caps the amount to be paid for certain services. These limits are based on a reference or benchmark, typically derived from a standard measure, such as the Medicare reimbursement rate for similar services, plus a certain percentage. Reference-based pricing aims to normalize costs and promote transparency in healthcare billing rather than have wide variances, which is often the case with traditional fee-for-service business models. To learn more about why transparency is essential in healthcare, check out our blog on the topic!
The Role of Brokers and TPAs in Reference-Based Pricing
Brokers and TPAs are integral in the implementation of reference-based pricing due to their role as intermediaries between healthcare providers and payers. It is essential for brokers and TPAs to educate clients on the benefits and intricacies of this payment model to set them up for success in navigating it. This involves careful planning and negotiation to ensure the payment benchmarks are fair yet cost-effective and that members understand the potential out-of-pocket expenses. Click here to learn more about how to explain contracts to clients.
At Health In Tech, we pride ourselves on providing the best options for clients. If you want to present various plan options to your clients so they can decide what is best for them, be sure to utilize our eDIYBS tool!
Benefits of Reference-Based Pricing
The adoption of reference-based pricing can lead to substantial cost savings for not only members but also employers, as the plans eliminate wide disparities in healthcare pricing. Moreover, these plans increase price transparency, which helps customers make more informed decisions and is a positive step toward a more ethical industry with efficiency and market discipline.
Challenges and Considerations of Reference-Based Pricing
Despite its numerous benefits, reference-based pricing does have some challenges and limitations. Provider pushback can be significant since reference-based pricing plans often pay less than the rates negotiated by insurance carriers. There is also the risk of balance billing with these plans. Balance billing is when providers bill patients for the difference between their benchmark payment and the billed charge. Being able to navigate these challenges with your clients successfully requires robust communication and thorough planning. Click here to learn more and further develop your communication skills regarding contract explanation as a broker or TPA.
Strategic Implementation for Brokers and TPAs
Before embarking on Reference-based pricing, brokers and TPAs conduct thorough market research, including understanding providers in their networks, prevailing Medicare rates, and how these compare to the current payment models. When brokers and TPAs have this data, partner with companies like Health In Tech, and focus on transparency, as noted above, they can set realistic and competitive levels to provide the best option for their clients.
Health In Tech also allows you to create custom strategies that align with your client’s needs to ensure a smooth and maximally beneficial transition. Click here to get started with our team!
Navigating Member Concerns with Reference-Based Pricing
Clear, continuous communication is critical in helping plan members understand how reference-based pricing works and its benefits. Brokers and TPAs should develop comprehensive educational materials, including FAQs, webinars, and one-pagers that demystify RBP and its implications for members’ healthcare choices and expenses. Brokers and TPAs can also work with our team to receive additional support and insight into creating healthcare plans.
The Future of Reference-Based Pricing in Healthcare
Innovation and technology will continue to play a significant role in the evolution of reference-based pricing models. Digital tools that have real-time access to pricing information and analytics will further enhance their strategy’s overall effectiveness. As the healthcare landscape evolves, brokers and TPAs must stay informed of developments to adapt and thrive in a reference-based pricing environment.
Reference-Based Pricing FAQs
Now that we’ve discussed what is reference-based pricing in healthcare and why it matters, we can discuss some of the most frequently asked questions.
When Does Reference-Based Pricing Apply to a Claim?
This pricing model determines the amount a patient pays for a “non-contracted claim,” also known as an “out-of-network” claim. In traditional payment plans, patients pay out of pocket for their care. With reference-based pricing, however, the patient is charged for the Medicare price plus a percentage or the other benchmarks we discussed earlier. Typically, these prices are much lower than traditional plans.
Why Do Employers Like This Pricing Model?
Employers like these plans due to the increased emphasis on transparency in healthcare. Additionally, employers may save money when using these plans, and they are provided with more information on how much a healthcare plan pays toward care to help make better-informed decisions in the future.
How Can I Learn More About Reference-Based Pricing?
If you want to learn more about the impact of reference-based pricing or how to get started, contact us, and a member of our team will be happy to help! The healthcare industry landscape is constantly evolving, and our team will work to ensure you stay ahead of the curve when it comes to developments and technologies to help you better create plans for clients.
Utilize Reference-Based Pricing and More Innovative Strategies with Health In Tech
Reference-based pricing is more than just a cost-containment strategy; it’s a movement toward transparency, fairness, and empowerment in healthcare financing. For brokers and TPAs, understanding and leveraging RBP can be instrumental in delivering value to clients and navigating the complexities of modern healthcare markets.
By fostering a deeper understanding of RBP, its benefits, and its challenges, we can collectively contribute to a more sustainable and equitable healthcare system.
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