The Right Step

Important considerations in referenced-based pricing

When it comes to health insurance, employers, and their employees want two things - transparency and cost savings. Over the years there have been many different strategies aimed at achieving this, each promising different levels of certainty. One strategy growing in popularity is the creation of custom or narrow networks, which exclude certain high-cost medical providers.

A more aggressive strategy is referenced-based pricing. This approach pays doctors, labs, clinics, and hospitals a percentage of an established benchmark. With referenced-based pricing, employers are essentially trying to set the price for their employees' medical care based on a certain "reference price." Some of the most popular parameters for pricing are Medicare pricing, reported costs from providers, or average wholesale price, among others. A similar approach is to set spending limits on certain high-cost procedures only and identify providers who accept that limit as full payment.

While referenced-based pricing seems like the perfect cost-saving scenario, some important considerations should not be overlooked.

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