When considering a switch toreference-based pricing, organizations will need to determine ifthe savings is worth the disruption it will cause to existinginsurance policies. (Photo: Shutterstock)

As the rising cost of traditional health care continues to be aconcern for organizations and its employees across the country,more are turning to alternative options to curb costs. One optionthat has been discussed recently is reference-based pricing. Although this modelhas been around for quite some time, it is now gaining morepopularity in light of the current state of health care.

With reference-based pricing, an employer agrees to pay a fixedamount or reimbursement for a defined medical service, rather thanusing a traditional insurance carrier to negotiate discounts fromthe provider. In this case, an employer partners with anadministrator that targets reimbursement rates based on apercentage of what Medicare would pay the provider for this sameservice, which is typically lower than the discounted ratenegotiated by the insurance carrier. Because this allows theorganization to set and better control costs, there are severalfinancial benefits associated with reference-based pricing.However, in order to reap those benefits, there are a few things tokeep in mind.

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