In today’s era of skyrocketing benefit costs, reference based pricing has proved to be a galvanizing concept. But what does it actually requires? Well, it is all about scrutiny and planning.
Reference-based pricing has emerged as one way for the self-insured employers to keep a control at the costs. Reference-based reimbursements have aroused a lot of interest among employee benefits professionals. Generally, reference-based pricing refers to prices that do not use a traditional insurance carrier that negotiates discounts from provider billed charges. The fact is that reference-based pricing is on the rise and this effective strategy has traditionally been out of reach for small employers, but carriers and TPAs are increasingly working with groups.
Here are mentioned a few approaches to reference- based pricing:
Stable Billing Support
When we talk about true reference-based reimbursements, there is no such contract between the hospital and the TPAs or consultants. A valid concern for employers is that the hospital will balance the bill of the employee for the difference between the billed charge master rate and reference-based price. There are some consulting services that provide patient advocacy services and legal support to the employees who are balanced bill.
There are some self-insured employers still prefer to have contracts in place with a hospital or a physician network for services. Some employers have even discovered that they can get a better value by pursuing these contracts directly, instead of using a traditional fully-insured plan.
Traditional insurers have options, too
Since reference-based pricing is creating a buzz in the healthcare industry, insurers are picking up on the fact that employers are becoming more sensitive to the rates of hospitals. Therefore, insurers are making themselves as more and more cost transparent.
Factors to Consider when going for Reference-Based Pricing
If you are pondering whether reference-based pricing is right for your benefits program, major factors that you need to consider include:
What type of reference based reimbursement model will you use?
Reference-based reimbursements comprise of two models – defined contribution and defined contribution with negotiation. In defined contribution model, employers are closely associated with reference-based pricing administrator to decide firm prices on services. And, in defined contribution with negotiation, a third party administrator sets the prices but will negotiate balance bills until both the parties agree.
Administrator’s Model for Pricing
Most of the models are based on Medicare or CMS reimbursement, plus a percentage. A higher margin exemplifies more providers will be likely to accept the well-defined payment as payment in full, without balance billing.
Role of Stop-loss Coverage
Will your stop-loss insurance enable adjustments for the negotiated costs, or will they pay costs only as mentioned in the plan? Failing to properly coordinate how reimbursements are defined by your plan document and stop loss vendor could also expose employers and employees to extra costs.
But reference-based pricing models do not come without challenges. To get it going, it requires a substantial amount of ongoing employee education and communications and personal support as well. Employers considering reference- based pricing program should ask their claims administrator to describe how exactly the plan meets the required criteria. Employers should also consult with their legal counselors to properly weight the compliance risks and whether the steps taken by the claim administrator might be deemed to meet each of the criteria. Reference-based reimbursements models will continue to gain immense popularity, especially when the healthcare costs are continuously rising. But executing a plan involves knowing the risks and taking into account what is right for everyone involved. So somewhere down the line, you have to do some analysis, is it right for you?