In light of the COVID-19 pandemic, experts anticipate health care costs will rise. The Kaiser Family Foundation estimates the cost of treating a patient with COVID-19 to be more than $20,000, with the total climbing to $88,000 for patients who require ventilator support. In April 2020, a Health Affairs article estimated that $163.4 billion in direct medical costs could result from the pandemic.

During the outbreak and subsequent shutdowns, hospitals and patients deferred non-emergent procedures so providers could focus on COVID-19 care. This helped reduce the potential exposure to and spread of the virus; however, deferring care could also lead to complications and increased medical costs down the line. In addition, many companies have been impacted financially by the pandemic. As a result, during a time when health care costs are expected to rise, companies may have less wherewithal to endure the increased financial burden.

With the strain brought on by the pandemic, employers are in dire need of innovative, cost-savings solutions. Benefits brokers should consider reference-based pricing (RBP) plans as a way to cope with the challenges ahead.

RBP In review

Prior to the outbreak, RBP had been gaining momentum as a strategy to help employer groups gain control over health care spending. Under an RBP plan, employers work with their benefits broker and plan administrator to set fair and reasonable prices for health services. These prices are typically set as a percentage of Medicare or the true cost of delivering that service.

Employers moving to an RBP model have achieved 25% to 30% savings over typical PPO plans. In addition, RBP eliminates the need for a provider network, meaning members have the freedom to seek care from a provider of their choosing, and they are given access to resources to help them select appropriately. Another benefit is cost transparency, including line-by-line auditing of claims avoids situations where employers may be overcharged for certain health services or products, such as being billed $1,000 for a patient toothbrush.

Recently, there's been an uptick in RBP interest, especially as companies attempt to navigate the challenges of COVID-19. However, in order to achieve success, they must work with their benefits broker and plan administrator to ensure they understand the risks.

Member satisfaction: Engage with health benefits

Members need to understand how an RBP plan is different from a traditional PPO plan. Careful consideration should be given to member education, so members fully understand and can engage with their health benefits. Communication should begin before an RBP plan goes into effect, as well as throughout the program. Members should understand the resources they have available, such as a member portal or call center to assist with questions.

An RBP plan should have an ongoing member outreach program, with touch points that take place throughout the plan year. Some members may not have had the opportunity to attend an open enrollment meeting, or perhaps didn't retain all of the information that was covered.

In terms of COVID-19, members should have support specific to the pandemic. For example, they may need help locating a testing site or making sure members know how to utilize telemedicine, when it's available and appropriate.

Balance bills: Eliminate and minimize their occurrence

When groups consider RBP, they often worry about balance bills sent by a provider to a member in the hopes of collecting the difference between the total amount billed and the amount the plan paid. There are several ways an employer group can work with their plan administrator to reduce the occurrence of balance bills. First, a group can establish direct contracts with imaging, lab and other services. These arrangements practically eliminate balance billing for these areas.

The plan administrator should also reach out to members who have recently visited a facility and incurred a facility claim. An advocate would contact the member in a series of communications – such as email, phone and text – to remind them that they may receive a balance bill from the facility. And if they do, they should call back, so an advocate can assist with that issue.

COVID-19 data: What employers need to know

As the pandemic continues, it's important that employer groups have the ability to monitor key metrics related to COVID-19 infections within their RBP plan's population. It's even more helpful if the data can be visualized in dashboards, graphs and heat maps.

When the outbreak first occurred, the CDC, CMS and AMA offered guidance on testing, treatment and safety guidelines. Using IDC codes, data visualizations will capture the most important COVID-19 metrics all in one dashboard. Using this snapshot, employers can easily assess trends and take appropriate action.

For example, employers need to be able to identify rising infection rates in particular states, cities and towns where they have offices. An employer might have seen 150 members with COVID-19 infections in April. By May, the number might have decreased to 10. But, if that employer started to re-open in June, and subsequently saw infections rise again, it might consider returning to a work-from-home arrangement to minimize exposure and keep employees safe.

COVID-19 data can also help employers understand health care spending related to the virus. A COVID-19 dashboard would summarize testing and treatment costs. If an employer offers both a PPO and RBP plan, it could compare the savings achieved under both plans. Typically, an employer might see a 40% to 50% discount via PPO, but as much as a 70% savings with RBP.

A heat map is another helpful data visualization, which plots the intensity of a plan's COVID-19 infections by region. It can help an employer identify hot spots so it can take appropriate action to address rising infection rates in certain offices.

Another reason tracking COVID-19 infections is important is OSHA will require employers to determine if an employee's COVID-19 infection is job-related. There's complexity in being able to do that, but access to the right data is the first step.

RBP metrics: The key to boosting plan performance

Besides COVID-19 infections, data visualizations and reporting can also monitor how well the RBP plan is doing. Here is a sampling, although by no means a comprehensive list, of reports an employer group should have access to:

RBP claims. This will include total claims volume, costs by month and year, total plan spending, and savings achieved. This report ensures an employer is achieving a reasonable level of savings. They can also view claims by location and drill down for additional details.
Fixed cost claims. These are claims not repriced by the RBP vendor because the plan has direct contracts with those facilities. For example, a plan might have such arrangements for imaging and lab services, which would then be included in this report.
Fixed expenses. This report would include costs such as claims administration and stop-loss insurance premiums. This report would be helpful if an employer is undergoing an audit or applying for a loan under the Paycheck Protection Program (PPP), as it would need to provide the cost of employee health benefits.
Heat maps. Employers can see where they have high health care costs. They might hover over a hot spot and see it has claims totaling $831,000.
Call log. This report summarizes the types of calls coming into the call center. Inquiry codes categorize calls by type. Providers might call in to verify benefits, confirm eligibility or check on the status of a claim. Members might call in to get help finding a provider or have questions about deductibles, out-of-pocket expenses, co-insurance, their EOB or a balance bill.
Large claims. This report can help identify claims that exceed a certain threshold, e.g. greater than $50,000.

As previously mentioned, a key benefit of RBP is cost transparency. However, employer groups can't leverage this benefit if they don't have access to data, reports and analytics. These tools help them drill down to the member, procedure, and provider level to determine if reasonable pricing and savings are being achieved. With this information, employers can continually enhance their plan performance.

RBP helps flatten the curve

Due to COVID-19, health care costs – which were already on the rise – are threatening to climb at an even steeper rate. Employer groups need solutions and data to help get through the pandemic and the resulting economic downturn. RBP plans provide an innovative approach that, when coupled with sophisticated analytics, can help employers and their benefits brokers flatten the curve not only on COVID-19 infections at worksites but also the costs in their health plans.

Marty Joseph is the president of HealthComp Holdings, which services more than 400,000 member lives. HealthComp Holdings has offices in Illinois, California, Pennsylvania, and West Virginia.

Instant Insights /

Reference-based pricing in a COVID-19 world

More From HR Executive

Related Stories

Recommended For You