One of the biggest concernsaround reference-based pricing for brokers andemployers alike is the potential that employees may be balancebilled.

Often, the argument goes something like this: With no negotiatedrates, hospitals are just throwing the chargemaster price atemployees, who are effectively left uninsured and staring downthousands, or hundreds of thousands, of dollars in medicalbills.

Who wouldn't stay fully-insured after hearing that? What brokerwants to present that strategy to a prospect?

However, this framing of reference-based pricing isn't entirelyaccurate. Often, brokers, carriers and hospitals alike paint thisstrategy with too broad a brush, suggesting there is just one waythese plans can work.

In fact, there are many ways reference-based pricing can beimplemented. Innovative brokers can take best practices and adaptthem for their own markets, and there are several ways to build aplan that creates the best outcomes for all stakeholders.

When it comes to balance billing, one aspect to consider is whenthe health plan negotiates with the provider. There are pros andcons of negotiating prior to an employee's surgery or service,versus after the surgery or service.

Here are a couple of things to consider.

Prior to service

Negotiating with providers before the surgery or service reducesthe risk of balance bills. Hospitals and the plan typically havealready determined an agreed upon reimbursement, and it is lesslikely that an employee will wind up with a surprise bill.

Further, brokers can structure this process similarly topre-authorization requirements that employers are already familiarwith, reducing the pain of transitioning to reference-basedpricing.

However, a drawback of negotiating beforehand is that hospitalscan simply refuse. In a larger market, the plan can then eithercounter the offer or direct the employee to a lower-cost site ofcare. But in smaller markets where a single hospital has a lot ofleverage, this may not work as well.

Post-service

Some reference-based pricing plans negotiate on behalf ofemployees after services have already been provided. One benefit ofthis strategy is that the service has already occurred, whichautomatically puts the employer in a stronger negotiatingposition.

After the fact, some hospitals will be more willing to accept apayment in excess of Medicare rather than fight for an even higherreimbursement. The “something is better than nothing” mindset canbenefit employers in this position.

On the other hand, this situation is more likely to result in achargemaster balance bill to employees, whichcan be stressful. Though many vendors have high success rates innegotiating balance bills on behalf of employees, many employersmay be unwilling to consider a plan where this is even apossibility.

Even so, the cost-savings associated with reference-basedpricing — under either negotiation strategy — are so significantthat brokers should be able to effectively communicate how theseplans work. Even if a client is unlikely to move in this direction,brokers will benefit from being able to explain the variety ofoptions employers have, and the pros and cons of each.