Smart Benefits: Self-Funded? What You Should Know About Reference-Based Pricing

Smart Benefits: Self-Funded? What You Should Know About Reference-Based Pricing

To manage increasing costs, a growing trend among self-funded employers is the use of reference-based pricing for health insurance. With this model, instead of pricing set by carriers or networks, employers determine fixed amounts they will pay for certain non-emergent services, and providers can decide if they’re willing to accept the limits.

For employers, the upside is clear: more transparency and control over costs, especially for services where they can vary widely like joint replacement. But what about employees?

By shopping around for providers, there’s an opportunity to save. But when costs incurred by the provider exceed the fixed amount, they may seek the remainder from the employee through what’s called “balance billing” – which can lead to uncertainty about out-of-pocket costs. And not all healthcare systems accept reference-based pricing.

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So to make reference-based pricing work for both the employer and employee, here are three keys to a successful approach.

• Communicate: In addition to describing the benefits – for instance, they don’t have to deal with networks – be sure you clearly explain how reference-based pricing works and what employees need to do to utilize it so they can avoid steep bills for services they thought were covered. And allow ample opportunity for employees to ask questions.
• Encourage Engagement: With reference-based pricing, employees will need to do due diligence when selecting providers. Encourage employees to take charge of their healthcare by researching costs of services using transparency tools. That way, they’ll understand what they’ll be responsible for so can find the care they want at a price that fits within their budget.
• Provide Support: When employees investigate providers, they may find that some are not as familiar with reference-based pricing or it may be challenging to obtain true cost transparency from providers. So be sure to provide ongoing support for employees so they can be successful in accessing care at the right price such as employee advocacy representatives who can help them find the right provider.

 

Rob Calise is the Managing Director, Employee Benefits of The Hilb Group of New England, where he helps clients control the costs of employee benefits by focusing on consumer-driven strategies and on how to best utilize the tax savings tools the government provides. Rob serves as Chairman of the Board of United Benefit Advisors, and is a board member of the Blue Cross & Blue Shield of RI Broker Advisory Board, United HealthCare of New England Broker Advisory Board and Rhode Island Business Healthcare Advisors Council. He is also a member of the National Association of Health Underwriters (NAHU), American Health Insurance Association (AHIA) and the Employers Council on Flexible Compensation (ECFC), as well as various human resource associations. Rob is a graduate of Bryant University with a BS in Finance