The CMS recently announced that ACA Marketplace enrollment is up 18% from last year. The Biden-Harris Administration has made expanding access to health insurance and lowering healthcare costs a top priority, leading to the national uninsured rate reaching an all-time low at the end of 2022.
There are now more health insurance members going into 2023 than ever before. And we all know what that means: more members, more unique member needs.
Understanding the challenges members face allows you to create solutions that support clients and members alike and reduce member abrasion. Of course, that’s often easier said than done. Especially, when cost of care is at the top of the list.
Healthcare costs are a major concern for many individuals and families in the United States. And, unfortunately, medical expenses only continue to rise. Meaning: many struggle to afford the care they need. As such, it seems almost inevitable that a reference-based pricing (RBP) model would emerge as a much-needed solution to modern healthcare challenges.
A survey by Willis Towers Watson revealed that global healthcare costs are projected to hit their highest level in almost 15 years due to rising inflation, increasing healthcare consumption, and continued economic uncertainty. And with over 78% of insurers anticipating higher increases over the next three years, the survey found little relief in sight.
In today’s world, everything is virtual, including our workforces. And due to such a widely dispersed membership, it has become increasingly more difficult for companies to build and manage their own network solutions. Payers are facing increased pressure around provider pricing variability, higher out-of-network fees, and member needs.
RBP is a cost containment strategy many payers are leveraging to help.
To better explain the benefits of RBP, Zelis Senior Vice President of Product Strategy Mary Piecuch recently joined an installment of the Future Healthcare Today podcast. You can listen here.
What is RBP?
Reference-based pricing sets a price limit on certain medical services based on a reference point, such as the Medicare reimbursement rate or the average cost of the service in a particular geographic area. A study published in Health Affairs found that RBP led to decreased spending on laboratory tests and imaging services, and that patients did not experience any adverse effects on health outcomes.
Simply put, the RBP model provides members with an open access health plan. It gives patients and payers a way to ensure adequate healthcare is administered, paid for, and covered while avoiding staggering provider contract fees or out-of-network prices. RBP also ensures providers can administer care without the anxiety of a long and arduous arbitration process if the patient isn’t in-network.
But RBP can be used in several ways. Think: full network replacement, out-of-network savings support, and custom network builds.
And thanks to open access to providers and zero network limitations, members can make informed provider decisions that directly align with their personal preferences without the restrictions that a traditional PPO network brings.
For example, the cost variance of an MRI might range between $800 – $4,000 (or more). But one could argue that the quality of the procedure and care provided is essentially the same. RBP eliminates the price variance with a set amount and ensures a win-win-win scenario:
- The member receives quality care at an affordable cost.
- The provider receives fair payment for services.
- The premiums stabilize for both the employer and employees.
Bottom line: RBP gives the control back to your members by setting maximum reimbursement amounts using pre-defined prices to provide a controlled savings model.
What are the benefits?
RBP puts money back into the hands of everyone in the self-funded community (e.g., the employer paying for the benefit, the member saving on care, the third-party administrators reallocating operational expenses). When using an RBP solution, clients save up to 28% more than a traditional network plan and realize roughly 73% of savings on individual health care claims.
Ultimately, RBP gives freedom of choice.
In a PPO model, members seek medical services through a defined network. Meaning: services are either in-network or out-of-network. That’s not the case with RBP.
This type of plan removes barriers so members can choose the providers they prefer to meet their unique needs
RBP also leads to:
1. Lower healthcare costs.
One of the primary benefits of RBP is that it can help lower healthcare costs for both employers and employees. By setting a price limit on certain medical services, RBP can incentivize patients to seek out lower-cost providers and encourage providers to reduce their prices.
2. Increased transparency.
RBP can also increase transparency in healthcare pricing, making it easier for patients to understand the cost of their care. This can help patients make more informed decisions about their healthcare and avoid unexpected bills.
3. Improved quality of care.
Some proponents of RBP argue that it can lead to improved quality of care by encouraging providers to compete on both price and quality. Providers who offer high-quality care at a lower cost may be more attractive to patients under RBP.
4. Customizable benefit design.
RBP allows for customizable benefit design. Meaning: employers and insurers can tailor the program to meet the needs of their specific population. For example, they can choose which medical services to include in the program and set different price limits for different services.
5. Cost containment.
RBP can be an effective cost containment strategy for employers and insurers, particularly in industries with high healthcare costs such as manufacturing and construction. By reducing healthcare spending, employers may be able to reinvest those savings in other areas of their business or pass them on to employees in the form of higher wages or other benefits.
But beyond just the benefits in the immediate term, in another recent podcast, Mary shared thoughts on the future of RBP models, as well as how Zelis’ recent acquisition of Payer Compass will impact the future of RBP. Listen now.
The wrap up
Overall, RBP is becoming a more popular way to control healthcare costs. A report by the Rand Corporation found that RBP could potentially reduce healthcare spending by up to $9.4 billion per year if it were widely adopted.
And as healthcare costs continue to rise, it’s likely that we’ll see a deeper exploration of RBP as a way to manage expenses. The intent is to provide an effective tool to help stabilize the healthcare claims costs. The benefits, however, have a far reaching, ripple effect throughout the entire healthcare industry.
To see how Zelis can help you deliver a member-first approach aligning patient experience and cost containment, visit us here.