What Is Reference Based Pricing (RBP) Insurance?

Healthcare costs in the United States pose challenges for employers and individuals. Traditional health plans often involve complex negotiations and unpredictable pricing. Reference Based Pricing (RBP) insurance is an emerging model to manage and potentially reduce healthcare expenditures.

Defining Reference Based Pricing Insurance

Reference Based Pricing (RBP) is a healthcare payment model that establishes reimbursement rates for medical services based on a specific benchmark, rather than relying on negotiated network rates or a provider’s billed charges. This benchmark is often a multiple of Medicare reimbursement rates (e.g., 100% to 200% of Medicare’s established prices). The model aims to create a more transparent and predictable payment system.

Unlike traditional Preferred Provider Organization (PPO) or Health Maintenance Organization (HMO) models, RBP plans generally do not have a traditional provider network. This offers members flexibility to choose any healthcare provider. The shift is from contracted discounts to transparent, cost-plus pricing based on an objective reference point.

RBP promotes cost transparency and controls expenditures by setting a clear maximum payment for services. This reduces wide variations in pricing for the same medical procedure. RBP is primarily used in self-funded employee health plans, where the employer directly assumes financial risk for claims. Self-funding gives employers greater control and allows for cost-containment strategies like RBP.

Essential Elements of RBP Plans

RBP insurance plans incorporate several elements to support their payment structure and address challenges. These components protect employers and employees while maximizing cost efficiencies.

Patient Advocacy/Support Services

Dedicated patient advocacy services are a component within RBP plans. These services assist members with understanding benefits, locating providers, and navigating the healthcare system. Advocates help members understand financial responsibilities and support complex billing inquiries. This support alleviates member anxiety and empowers informed decisions.

Balance Billing Protection/Mitigation

A primary concern with RBP plans is “balance billing,” where a provider bills the patient for the difference between their charge and the RBP-determined payment. RBP plans use strategies to mitigate this risk, including direct negotiation with providers or legal support. The No Surprises Act (NSA) offers protections for certain services, but RBP plans also have mechanisms, often through patient advocacy centers, to resolve disputes.

Stop-Loss Insurance

Since RBP plans are typically used by self-funded employers, stop-loss insurance is a safeguard. This coverage protects the employer from catastrophic individual claims or high aggregate claims exceeding predefined financial thresholds. Specific stop-loss covers high costs from a single claim, while aggregate stop-loss protects against total claims exceeding a certain amount over a period. Stop-loss insurance helps manage the financial risk assumed by the employer.

Operational Aspects of RBP Coverage

An RBP plan functions through a specific workflow impacting employers and employees. Its practical application involves managing claims and addressing potential issues.

Employers typically work with a Third-Party Administrator (TPA) to implement and oversee an RBP plan. The TPA manages daily administration, including claims processing and provider interactions. This partnership often includes a stop-loss carrier for financial protection against large claims. The employer provides strategic oversight and ensures plan alignment with benefits objectives.

Employees have flexibility when seeking care under an RBP plan. With no traditional network, members can generally choose any provider. At the point of service, the member presents their RBP plan identification. The provider then submits the bill directly to the RBP plan administrator.

The RBP claims process involves the administrator repricing the provider’s bill based on the established reference point, such as a multiple of Medicare rates. The plan then pays the provider the RBP-determined amount. If the provider’s charge exceeds this payment, they may attempt to balance bill the member.

If a provider attempts to balance bill, the plan’s patient advocacy service intervenes. Advocates negotiate with the provider to resolve the dispute. Often, these negotiations result in the provider accepting the RBP payment as payment in full, protecting the member from unexpected costs. This proactive support ensures a smoother experience for the member.