It is no secret that overall, healthcare costs are rising, in a climate where employees are looking for more and more from their benefits offerings. For employers it is a constant challenge to provide a robust package that will help with the goal of attraction and retention of talent, while also trying to control costs. Reference based pricing health plans have become increasingly popular in recent years as employers look for ways to contain those rising healthcare costs.
Reference based pricing is a type of health plan that sets a maximum allowable fee for certain procedures, tests, and services. While this can indeed be an effective way to control costs, there are pros and cons to consider before deciding if it’s the right choice for your company.
- Cost Control. The primary benefit of reference-based pricing is that it helps employers control healthcare costs. By placing a limit on what providers can charge for certain services, employers can ensure that their employees are only paying for the care that they need.
- Transparency. Reference-based pricing can be more transparent for employers, as they can easily see what they are paying for each service. This allows employers to make informed decisions when deciding which services to cover.
- Create Competition Among Providers. Since providers must compete for the business they must offer services at or below the reference fee in order to be considered for payment. This encourages competition and helps to keep prices reasonable.
- Employee Choice. Since employers are only paying a set fee for a service, employees can choose from any provider that meets the reference fee. This allows employees to find a provider that best meets their needs and budget.
- Limited Availability of Certain Services. Since providers are limited in what they can charge, they may be less likely to accept patients who are covered by these plans. This means that patients may have to travel further to find care or may be unable to access certain services.
- Administrative Burden. Employers must constantly monitor and adjust the prices they are paying for each service.
While it is not for everyone in all situations, all in all, reference-based pricing is a great way for employers to control their healthcare costs while still providing quality care to their employees. It encourages competition and gives employees more choice while allowing employers to better manage their costs. It is a win-win situation for both employers and employees.
For more information and for a no cost, no obligation current plan review please reach out to us at PF Compass!
Brian Honan | Partner
PF Compass Employer Guidance & Benefit Solutions
440 Route 22, E., Suite 190
Bridgewater, NJ 08807
Tel (973) 732-0697