Plan Sponsor Rejoices…………………
Nothing says “fiduciary duty” like blindly approving a +20% renewal.
By Craig Gottwals – Sep 02, 2025
If your agent, consultant, broker, advisor, whisperer (or whatever title they title thye’re using this month to obfuscate how poorly our industry has performed) only talks to you about “buying insurance” or renting one of the bloated national PPOs, you’re wasting money and, quite possibly, failing your fiduciary duty to your plan.
The lazy excuse is always the same: “Reference-based pricing is too hard, too scary, too risky.” Maybe that was true a decade ago, back when brokers measured their worth in golf outings and shrimp towers on insurer Bay cruises. But not today. Not if you want to manage the second-largest line item in your budget with the same discipline you apply to payroll, supply chains, or M&A.
Reference-Based Pricing (RBP) is a health plan strategy where the employer sets fair, transparent payment levels for medical services, usually based on a multiple of what Medicare pays, rather than blindly accepting the inflated charges that come with a traditional PPO contract. Instead of paying whatever the hospital demands, you pay a fair, benchmarked price set by the plan, not the industry cartel.
And it’s the reason seven of our last eight clients came to us. It’s not a magic bullet. It is simply one tool in our utility belt. Now, it happens to be the most powerful one because it is based on reasonability, which is the core of contract law in all 50 states when an exact price is not agreed upon beforehand.
Still, it is only one tool alongside direct primary care, cash-bundled payments at centers of excellence, selective contracting, transparent pass-through PBMs, and high-value physician-only networks.
We use the lightest tool available that solves our client’s problem – whatever that happens to be. In American healthcare, ninety percent or more of the time, the problem is price, and RBP becomes the iron-clad backstop for that remedy.Subscribe
Here are three recent, real-world RBP stories from three very different clients:
- When RBP flows beautifully. Try not to hear Trump when I write “beautifully.” It’s a beautiful, beautiful plan. Quite amazing, really. Quite something! Okay, sorry. I’ll stop.
- When RBP is only a threat.
- When RBP “struggles” and still wins.
Act I: When RBP Flows Beautifully
Here is our latest RBP case study. Heading into year 3, this grocery chain saved 39% from 2023 to 2024 and is on pace to save ANOTHER 18% in year 2.
No, that’s not normal. You can bank on 25% savings in year one and a flat to 4% year two.
But we’ll do that with richer benefits than you have today and lower employee contributions.
CFOs and CHROs, this client is available for you to speak with (along with many others).
Is RBP more complex than the canned solutions? Yep. It is. But we’re here to make it doable and save you more money than you ever thought imaginable.
Act II: When RBP Is Only a Threat
Now let’s talk about a different client, and the story I lay out in this video:
They received a 20% fully insured renewal. No claims spike, no credible math, just a carrier seeing if they could squeeze another million out of the CFO’s budget while somehow keeping a straight face.
We analyzed every iteration for this employer under the sun. Self-funding and RBP alternatives came back as low as negative 6% to negative 8%. Suddenly, the carrier had a change of heart. Their “final” renewal plummeted from +19.9% to 0% flat overnight.
Did the risk change? Nope. Did the claims change? Nope. Did the actuarial tables suddenly reveal a new cosmic truth? Nope. The only thing that changed was that we introduced leverage, real alternatives the carrier couldn’t ignore.
This is what fiduciary discipline looks like. Without a broker who can actually install RBP, you’ll never get that kind of swing. You’ll keep swallowing double-digit renewals while your board wonders why you negotiate vendor contracts and tax liabilities down to the penny, but let healthcare eat you alive.
Act III: When the System Pushes Back (and You Still Win)
Insurance carrier apologists and institutional brokers love to ask, “What happens when RBP doesn’t work?” Fine. Let’s talk about it.
When our client, Riesbeck Food Markets, a respected grocery chain in southern Ohio, moved into RBP, they hit a standoff with the West Virginia University Health System (WVU). WVU flat-out refused to accept the plan. For three months, WVU turned away Riesbeck employees as we worked with our TPA and ClaimDOC to steer patients to more reasonably priced alternatives and executed single-case agreements for treatment that really should have been handled at WVU. The clash made it into Bloomberg. Credit to the reporter, she did a commendable job tackling a tough subject, and we were glad to be interviewed. But, due to space limitations and the complexity of the topic, some of the nuances of the situation remained on the cutting-room floor.
Here’s what Bloomberg reported:
Riesbeck Food Markets… employees were turned away from West Virginia University Health System for three months until Riesbeck signed a traditional contract with them.”
WVU’s chief strategy officer, Ben Gerber, said: “They have specifically chosen not to have a participation network at all… it’s not really WVU singling out an employer. It’s actually just the other way around.
Why would we want a network in the first place? Our RBP networks are already open. Employees can see any provider in the country, so long as that provider bills a reasonable amount. In practice, we define “reasonable” as anything under 200% of Medicare. And when specialties or local market conditions demanded more, we negotiate higher.
So WVU’s claim that Riesbeck somehow “chose not to participate” is disingenuous. Riesbeck didn’t reject WVU. WVU rejected the idea of fair reimbursement. They hid behind semantics while refusing to engage in what nearly every other regional system accepts: a transparent, open-access arrangement.
Here’s what actually happened after WVU shut the door:
- We held firm on price. Riesbeck contracted with WVU at pricing that ultimately falls within a couple of percent of what Riesbeck would have paid under their prior PPO.
- We added audit rights. Unlike the former carrier’s contract, this deal gives Riesbeck the right to review claims and catch errors. That alone is worth about 10% savings. See my recent post, here, explaining that 80% or more of hospital bills contain errors.
- We preserved steering authority. That means we can lawfully direct members away from WVU and into better-valued systems. This is yet another “service” your PPOs are disallowed from engaging in once they enter the system’s traditional agreements.
So, will Riesbeck achieve the 30–40% savings we often see? Probably not. But they’ll still land in the 12% to 25% range, with richer benefits, lower copays, lower deductibles, and lower employee contributions.
That’s what “failure” looks like in RBP. Lower costs, better benefits, and more control than before.
The article showed WVU refusing to play. However, what that ultimately meant for us is that Riesbeck pivoted, adapted, and emerged stronger. That’s fiduciary stewardship in action.
The Employer’s Choice
Across these three stories, the message is simple:
- When RBP flows like a river: you save big and members are happier.
- When RBP is even just on the table, you can expose carrier fraud and save millions without flipping the switch.
- When RBP “struggles”: you still win, because you hold the contract, the audits, and the steering power.
The only time you lose is when you keep buying traditional insurance or rented mobbed-up PPOs.
Employers, would your board accept this level of waste in any other line item? Would you approve a supplier contract that overbilled by 20% every year? Would you allow a tax advisor to shrug and say, “That’s just trend”? Of course not. But too many CFOs and CHROs nod along when carriers pull the same stunt with healthcare.
RBP isn’t perfect. It isn’t magic. But it is the strongest lever employers have to cut costs, improve benefits, and reclaim control. The question isn’t whether it works. It’s whether you have the grit and the team to employ it.
And who should NOT engage in RBP? Well, it’s funny you should ask, as that was my very latest post on the topic – Bad Bets for Reference-Based Pricing.
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By Craig Gottwals
My musings on healthcare, bass fishing, free markets & books.Subscribe
