Here’s an example that shows the power of using reference-based pricing.

Many people are in a position where they like their health care plan, but they don’t like the cost. One of the ways we can save companies money on their medical health insurance is to employ a concept called reference-based pricing.

This is an alternative to the PPO (preferred provider organization) model. Here’s a sample of a typical hospital claim to demonstrate what this strategy can do for you:

Let’s say you have a $10,000 hospital charge. With the PPO model, there will be a discount of 30% to 50%. Let’s say it’s 50% and your cost ends up being $5,000. The actual charge will be $1,227.

Reference-based pricing references the Medicare reimbursement rate. Medicare is recognized and accepted by almost every hospital and physician. They take the actual cost and add 8% to that, resulting in a 108% reimbursement. It will use this as a reference point and negotiate your claim to a multiple of that.

"Medicare is recognized and accepted by virtually every hospital and physician."

In this specific example, reference-based pricing is going to negotiate a facilities charge to 150% to 200% of that Medicare reimbursement. With 200%, that’s going to get the $10,000 hospital claim down to around $2,650. That’s 53% below the discounting of the PPO.

You can see that if we ripple that strategy across all of your claims throughout the year, you'll see substantial savings and it will really make an impact on the cost of your plan.

Reference-based pricing is available to groups down to 10 employees. If you’d like to explore this option further or if you have any questions, don’t hesitate to reach out via phone or email. We look forward to hearing from you.