How to Make Reference-Based Pricing Work For Your Plan

Mixing Reference Based Pricing with direct agreements is like mixing oil and water……………..

aequum Provides Administrators with Partnership and Guidance

aequum is a first-of-its kind tech-driven company in the complex field of medical billing. Our tech-driven team of specialists partner with claims administrators, providing them with data-driven insights, technical solutions and legal advocacy support. Working collaboratively, we are advancing the adoption of reference-based pricing (RBP) and price transparency solutions to manage costs, reduce spending and gain potential savings.

For example, it is common practice for hospitals to vary the charge for the same procedure depending on the patient’s health coverage. RBP moderates excessive price disparities: by establishing a benchmark fee schedule and payment ceiling – instead of negotiating fees by contracting with a provider network. Many states have adopted RBP processes for their own employees’ coverage and RBP processes are now commonplace in Medicaid. RBP is also consistent with reimbursement structures used by Medicare and the Veteran’s Administration. Plan administrators benefit from the consistent application across all providers and health networks.

A successful RBP plan should have the following components:

  • Carefully drafted plan documents that strengthen the rights of the patient to dispute bills
  • Avoidance of contracts with providers or limited use of contracts
  • A defensible repricing mechanism
  • A robust patient advocacy process that includes legal representation

The No Surprises Act (NSA) may prompt a significant expansion in the prevalence of RBP plans since RBP often eliminates the negative effects of excessive charges otherwise shared by the employer and the participant. We are mindful, however, that regulatory agencies often adopt regulations that seemingly extend the reach of legislation or conflict with the express language of the statute. Additional litigation challenging some of the regulations would be “no surprise.”

There is a potential risk to RBP that health plan sponsors and administrators need to be aware. NSA creates an independent dispute resolution (IDR) process. The IDR process applies when a TPA (or plan) can calculate a qualifying payment amount, which is typically the median in-network rate.

RBP plans that use narrow networks or have negotiated contracts with providers and plans that utilize RBP as the mechanism to price out-of-network claims will be affected by this legislation. In both instances, there would exist a median in-network rate pursuant to which the qualifying payment amount could be calculated.

The Advantage of a “Pure” RBP as a Compliant and Strategic Response to NSA

The most effective way to address the NSA legislation is to adopt a “pure” RBP plan. Pure RBP plans that do not contract with providers should remain unaffected by NSA because there aren’t any out-of-network claims; nor is there any determination of a median in-network rate.

Adopting a “pure” RBP structure, coupled with tech-driven data support, may avoid unreasonable or excessive provider charges – potentially lowering both the cost of coverage and employee point of purchase cost sharing. Given the wide variation of provider charges for the same services, without any difference in quality, a pure RBP design offers an opportunity to avoid excessive and unreasonable provider fees and charges.

Utilizing Tech-Driven Data Support
Plan administrators benefit from data insights through innovative software and tech-driven data analysis solutions. Real-time price information of the true cost of care enables engaged plan administrators make the most advantageous cost-benefit decisions. A tech-driven approach provides information and tools to better manage health care costs.

Harnessing technology to compile the vast amount of data, followed by extensive claims analysis, can help identify areas of escalating health costs, in turn highlighting opportunities to reduce and manage spending. Innovative medical billing services utilize powerful data-driven software and online data analytic tools – allowing fee comparisons that identity fair and reasonable prices.

Your Medical Billing Partner

Given today’s widespread, broad-based inflation, significant increases in provider fees are expected for 2023. Plan sponsors should take strategic action to ensure that their employer-sponsored, self-insured plans incorporate the most effective strategies for addressing today’s economic challenges to the “health and wealth” of their participants. Those cost-management strategies include effectively designed acquisition cost-based pharmacy pricing, HSA-capable coverage, reference-based pricing, adequate participant protections against balance billing, participant advocacy, and litigation support.

The right medical billing partner can facilitate all these strategic designs and processes – acting as an agent of change, embracing technology innovation and advocating for “what is fair and just.” The right partner will also provide value-added services through turnkey solutions, innovative plan designs, administrative and compliance support, as well as participant legal representation. This support provides invaluable guidance to navigate federal and state healthcare regulations, identify areas to lower risk, reduce costs, and maximize value.

As your partner, aequum is here to support your plan’s success in 2023 and beyond. Please contact us if you have any questions or need support. For more information, visit