Why Aren’t More Employers Implementing Reference-Based Pricing Benefit Design?

In contrast to deductibles, where the patient pays the “first dollar” of medical expenses, under RBP, the patient is responsible for the “last dollar.”

Editor’s Note: Please consider the source when reading this article published by the American Journal of Managed Care – Reference based pricing plans eschew managed care networks…………………………

The American Journal of Managed Care > February 2019 – Published on: February 12, 2019

Why Aren’t More Employers Implementing Reference-Based Pricing Benefit Design?

Anna D. Sinaiko, PhD, MPP; Shehnaz Alidina, SD, MPH; and Ateev Mehrotra, MD, MPH

This qualitative study finds low employer adoption of reference-based pricing (RBP) benefit design and that redesign of RBP may be necessary to overcome barriers to adoption.

ABSTRACT

Objectives: There is robust evidence that implementation of reference-based pricing (RBP) benefit design decreases spending. This paper investigates employer adoption of RBP as a strategy to improve the value of patients’ healthcare choices, as well as facilitators and barriers to the adoption of RBP by employers.

Study Design: We conducted a qualitative study using 12 in-depth interviews with human resources executives or their representatives at large- or medium-sized self-insured employers.

Methods: Interviews were conducted and recorded over the phone between March 2017 and May 2017. Interviewees were asked about their adoption of RBP and facilitators and barriers to adoption. We applied thematic analysis to the transcripts.

Results: Despite broad employer awareness of RBP’s potential for cost savings, few employers are including RBP in their benefit design. The major barriers to RBP adoption were the complexity of RBP benefit design, concern that employees could face catastrophic out-of-pocket costs, lack of a business case for implementation, and concern that RBP could hurt the employer’s competitiveness in the labor market. The few employers that have adopted RBP have implemented extensive, year-round employee education campaigns and invested in multipronged and proactive decision support to help employees navigate their choices.

Conclusions: Unless several fundamental barriers are addressed, uptake of RBP will likely continue to be low. Our findings suggest that simplifying benefit design, providing employees protection against very high out-of-pocket costs, understanding which decision-support strategies are most effective, and enhancing the business case could facilitate wider employer adoption of RBP.

Am J Manag Care. 2019;25(2):In Press

Takeaway Points

Reference-based pricing (RBP) benefit design gives patients a financial incentive to switch their care to lower-priced providers.

  • Despite broad employer awareness of its potential for cost savings, very few US employers are including RBP in their health plans.
  • Key barriers to RBP adoption are concerns about the complexity of design, risk of employees potentially facing catastrophic costs, weak business case for RBP, and potential to hamper the ability to retain and attract workers.
  • Redesign and development of easy-to-implement, effective employee education and decision-support strategies could facilitate wider adoption of RBP.

US healthcare prices vary widely both across the country and within local markets.1-3Reference-based pricing (RBP) benefit design gives patients a financial incentive to switch to lower-priced providers. Under RBP, the health plan determines a “reference price” for a given medical service, and the plan will cover medical expenses for that service up to that price. If a patient receives care from a provider whose negotiated payment is above the reference price, the patient is responsible for paying all medical costs above the reference price (ie, “balance billing”), along with all other cost sharing. RBP is applied only to select medical services, usually those that are nonemergent and for which patients have a choice of providers.

In contrast to deductibles, where the patient pays the “first dollar” of medical expenses, under RBP, the patient is responsible for the “last dollar.” The intent is to avoid the observed patient response to high-deductible health plans (HDHPs), for which the evidence suggests almost no effect on price shopping but reductions in needed services,4-7 and instead to have patients focus on where to receive care. In many cases, a plan’s maximum out-of-pocket cost does not apply, so even patients who have reached their maximum in their plan year still have an incentive to select lower-priced providers for RBP services.

Reference pricing has been used for pharmaceuticals in Europe and Canada for more than 2 decades.8,9 Only recently has RBP been implemented in the United States, with a focus largely on nonpharmaceutical services. Evaluations of US RBP programs have found reduced spending between 13.9% and 31.0% for joint replacement surgery,10 colonoscopy,11laboratory tests,12 prescription drugs,13 and ambulatory surgery.14

Despite this robust evidence, recent Aon Hewitt surveys report that only 5% to 6% of employers were using RBP in 2015-2016.15,16 Little is known on why there has been low uptake. To better understand this landscape, we conducted a qualitative study of employers’ views of RBP. Specifically, we sought to understand employer perspectives of RBP as a strategy to engage employees in healthcare decision making, their adoption of RBP, and their concerns about RBP.

DATA AND METHODS

We identified a convenience sample of 13 individuals across 12 organizations, including human resources executives at large self-insured employers (6 interviewees at 6 organizations) and representatives of consulting firms and purchasing coalitions who support employer health benefits decision making (7 interviewees at 6 organizations). Interviewees were selected because they had adopted (n = 4) or closely considered (n = 9) RBP for their organization or on behalf of other purchasers. Neither the proportion of employers who adopted RBP nor these opinions are intended to be representative of all self-insured employers; they are the perspectives of individuals who have considerable experience with employer-sponsored insurance purchasing and who have undertaken serious consideration of issues related to RBP programs.

We developed a semistructured interview guide with open-ended questions focused on 3 domains: (1) efforts to engage employees in their healthcare decision making, (2) perceptions of RBP as a strategy to steer patients to higher value among alternatives (eg, HDHPs, price transparency, narrow provider networks), and (3) facilitators and barriers to implementing RBP. For those who implemented RBP, we asked additional questions about the experience with RBP and lessons learned.

Telephone interviews were conducted from March 2017 to May 2017. They lasted between 30 and 45 minutes and were recorded and transcribed. We analyzed interview data using accepted methods for qualitative analysis.17 We began with a preliminary set of deductive codes derived from the interview guide, but also allowed for inductive codes to emerge. We identified key themes characterizing employer perceptions of RBP, as well as facilitators and barriers to RBP adoption, and selected quotations to illustrate these themes. The Institutional Review Board at the Harvard T.H. Chan School of Public Health approved this study.

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