07/06/2022

Take a New Approach to Savings With Reference-based Pricing

Offering competitive health benefits is a challenge for many employers

As inflation continues to drive up costs, and another recession is likely, offering competitive, cost-effective health benefits will continue to be a challenge for many employers. Organizations seeking to reduce healthcare costs and provide attractive benefits may need to look beyond traditional health plan offerings.

Reference-based pricing (RBP) plans, initially conceived as a way for blue-collar employers to provide basic, low-cost health benefits, could now be worth exploring as part of a broader offering to meet a wide array of employee needs. Unlike a traditional PPO, where the insurance company uses a top-down pricing method to set the rates, RBP vendors price from the bottom up, typically using the Medicare reimbursement rate as a benchmark.

Offering providers 120 percent to 170 percent of the Medicare rate often results in much lower healthcare costs — and helps to insulate RBP plans against inflationary pressures and rising costs.

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