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.

Continue Reading for Free

Register and gain access to:

  • Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.