Reference Based Pricing Benchmarks – Why Pay More When You Can Pay Less?

What’s the best Medicare pricing benchmark plan sponsors should use? Is it 100%, 120%, 150% or 200% of Medicare? Is there a material difference in balance billing issues between these tiers? The answer may surprise you.

Most believe the higher the tier the less chance there is of a balance bill. However that’s not always true.

Studies show there is little difference in the number of balance billing issues between these tiers. For example the BUCAs pay out-of-network providers anywhere from 105% – 140% of Medicare with balance billing averaging less than 5% of claims. Reference Based Pricing plans, no matter what tier is used, uniformly experience balance billing issues averaging 2% of claims or less.

If you’re a Reference Based Pricing plan, why aren’t you paying 100% of Medicare? Why pay based on a higher benchmark when providers are willing to take less?

A May 12, 2022 KFF Health News report lends support to the argument for a move to lower reimbursement levels by Reference Based Pricing plans:

“Across states, the share of physicians accepting new Medicare patients ranged from a high of 95% in three states (Iowa, Minnesota, and Pennsylvania) to a low of 76% in the District of Columbia, similar to the range across states for privately-insured patients.”

“Previous KFF analysis has found that even though Medicare payments to physicians are lower, the vast majority of Medicare beneficiaries report having a usual source of care and high levels of satisfaction with the quality of their medical care. In addition, two separate KFF analyses, using data from 2012-2013 and 2020, found that the nearly all physicians accept Medicare, and only a small fraction “opt out” of Medicare altogether.”

On his popular insurance blog, Joe Paduda wonders why the BUCAs pay twice what Medicare Pays ”You and your insurance company pay your doctors and hospital more than twice what Medicare does. Yes, the Feds can exert pricing power – but why can’t United Healthcare, or Aetna, or Blue Cross?

Our answer is “They can but they don’t.” The reasons make for a good topic for another blog posting.

Last year we moved several of our Reference Based Pricing groups to 100% of Medicare. To date there has been no uptick in balance billing.