Reference-Based Pricing Programs – The Good and The Ugly

Reference-Based Pricing plans can be a great way for employees to really choose what’s best for them without overspending. And because the high cost of healthcare impacts both employees and employers, developing a cost-effective and engaging benefits program is essential.

A traditional program provides a network of hospitals, clinics and healthcare providers contracted with your insurance company which can offer a certain amount of ease. However, those facilities may not be charging fair prices. Hidden fees and opaque cost structures can often disguise the real cost of care. A health care program with a true open “network” can increase transparency by setting the cost of services at a fair and reasonable level, giving employers and employees more control.

Employees can then know they are receiving care at a level that is fair to them as well as the healthcare provider, and can explore the quality of care received between different providers. Unlike a traditional plan where employees are confined to a specific hospital, having a true open “network” gives employees the ability to choose a provider that offers more quality care.

When implementing a plan that utilizes a true open “network” structure the good and the ugly can become apparent quickly.

A $375,000 DIFFERENCE

With an open network and with help from a skilled consultant, an employer can identify where a hospital could be charging extreme, unfair prices for the same procedure that can be performed elsewhere. Recently, after reviewing a client's healthcare program, we discovered sizable claims coming from a hospital. An employee, who needed a doctor-prescribed injection every two weeks, was paying an astonishing $21,624.00 per injection.

After considerable research and planning, we were able to identify and establish a care pathway with another hospital and secure a payment of $7,194.29 per injection, producing an annual difference of over $375,000. A change to the current plan that made a substantial difference to this employee — and their employer.

Removing waste from the healthcare system can help add value and reduce the consumption of resources that affects employees and employers over time including:

• Renewal increases. The excessive over-charging for medications and procedures to employees through their health insurance plan can translate into increased costs, contributing to high renewal increases. Reducing these costs can help reverse this trend.
• Uninspiring Product Offering. “Off the shelf” health insurance plans from large insurance companies can be less flexible. Employers have less control and choice with this type of plan. A high value alternative with a variety of options can enhance your benefits program by allowing employees to choose options that work for them.
• Dilution of Benefits. Whenever you are unable to manage the supply chain of healthcare the path forward in your health insurance plan selection will be to raise deductibles/out of pocket expenses for the employees while also increasing their paycheck contributions. The ability to investigate and change providers can produce cost savings for individual employees as well as the whole group, which can improve the financial circumstances for your workforce.
• Reducing wages in the future. Continued cost increases and loss of resources within the employers’ compensation package can eventually contribute to reduced employee wages, which can impact employee retention and recruitment efforts.

Making changes to your healthcare program can feel intimidating, but it doesn't have to be. Adding flexibility and transparency to your healthcare program can happen slowly over time and produce significant savings for your organization and your people.

THE UGLY

While employees have the flexibility to choose where they access care, some establishments could create confusion at the time of treatment or appointments, stating that they don’t understand the employees insurance program. These facilities seem to put the billing department between doctors and the patients who need their care. An ugly practice that penalizes Americans.

A healthcare program with a true open access “network” doesn’t mean no coverage. Having an open network can provide employees with fair, reasonable pricing that they can get behind and celebrate.  It is about time that someone protected their wallet in the healthcare marketplace. Open network plans can also create a wide range of healthcare options for employees, giving them the choice of where and who they receive care from.

If you have questions about your healthcare plan, don’t hesitate to reach out.