RBP Business Plan – 5 August 2005

Market Evolution of Reference Based Pricing Plans

Timing is everything when it comes to new and innovative ideas in health care delivery as the market must be ready and receptive. In 2005 it wasn’t……………..But two years later it slowly took hold in Texas…………And we were ready.

By Bill Rusteberg

Back in 2005 I received a Business Plan for a new group health insurance plan product tentatively named The ComparaMed Care. It was sent to me by an actuary consulting firm I’ve worked with over the years.

“Bill, please review this and let me know what you think” was the note attached.

I happened to find it this morning as I was doing research on another project. So I read it again. Here are some highlights:

“Several industry efforts to slow the rate of medical cost increases have been undertaken over the years, both via the growth of HMO’s and by insurance contracts with Preferred Provider Organizations (PPO). In recent years “Mini-Med” plans have been introduced in an effort to provide affordable, albeit limited, medical expense coverage……….Their appeal is their cost; their curse is that they tend to instill an unfounded sense of security in those consumers who can least withstand the financial ravages of catastrophic injuries and illnesses.”

“……..hospitals as well as most physicians and other medical providers readily accept Medicare payments and do not balance bill their patients (except for the patient’s deductible and coinsurance share). On the other hand, the insurance industry has not received equal treatment as to fee structure from these same providers, particularly those in communities outside of large metropolitan areas.”

“……unless the insurance industry, consumers and the medical community unite to alleviate these conflicting and mounting pressures, some form of Federally enacted national health insurance scheme is inevitable.”

“XYZ (Actuary Firm) has designed the ComparaMed Care Group Medical Insurance Plan to approximate Medicare coverage features, employing an approach to medical expense treatment that already has wide acceptance by consumers and by the medical community.”

XYZ’s plan design concept has the following advantages:

  • Benefits are generally comparable to Medicare coverage;
  • Medicare-like schedule of eligible charges is substantially lower than billed charges;
  • Medicare-like schedule of eligible charges better enables patients to negotiate with providers to accept Medicare-like fees as payment in full;
  • Reduced vulnerability to inflation-generated claim cost increases;
  • Lower product expense load through elimination of UR and PPO access fees;
  • More affordable premium rates for employers and employee


XYZ (Actuary Firm), in partnership with a small national carrier, incorporated this business plan on a fully-insured basis for employer groups of 20-99 employee lives. It didn’t sell. That was in 2005. It’s timing was too early, the market wasn’t ready.

Since the plan was filed in Texas that year, I wonder if it’s still active? If so, a fully-insured RBP plan would do well in today’s market.