As the true impact of
As a result, benefit advisers won’t be able to rely solely on traditional strategies. More than ever before, employer clients will need innovative and highly customizable approaches to control costs and address the healthcare needs of their member populations. Reference-based pricing (RBP) is one such winning formula, especially since the model has evolved into a more powerful disruptive force.
RBP relies on a reference point, such as Medicare, to help set prices for medical services at fair market value rather than traditional network discounts. As with any new solution, RBP’s early adopters at times experienced a bumpy road, but they were rewarded with savings. The benefit for the rest of the market is that these forerunners blazed a trail, identifying challenges and developing strategies to address them.
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With increased adoption of RBP, which has been around for more than 10 years, the model has undergone significant improvements. Interested advisers and employer groups can look to RBP experts to provide helpful rules of the road to ensure a successful program engagement. Common concerns employers have that benefit advisers can assure them have been addressed in RBP 2.0 include:
Whether it’s right for them
In the beginning, an adviser might have worked with an RBP vendor to sign up any company that was interested. With experience in implementing RBP for many companies, we’ve come to understand that it’s not a one-size-fits-all solution. Advisers must work with RBP plan administrators who can provide upfront guidance on what makes a company a good fit. Obviously, the most important criterion is company leaders, including CEOs and CFOs, who are eager to lead the charge in getting a handle on healthcare spending.
Corporate culture is key. Has your client had success in implementing forwarding-thinking strategies and a track record of managing change well? What industry is the company in? Where are employees located?
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Whether it’s a risky model
Trying something new always feels risky, especially with employee satisfaction and trust on the line. It’s important to remember that many employers have experienced success with this model, including reduced spending, higher quality care and improved member experience. Advisers and employers can reference these cases.
Another advantage is the model’s transparency. Since it uses a set reference point, there’s a clear understanding of what employees will pay for medical services, and how they can make decisions to save. This is an advantage over traditional plans whose network discounts are actually applied to an already inflated base price.
RBP experts leverage data and analytics to customize each customer’s approach. For example, they will assess plan history and claims experience to identify high-cost and problematic trends. With this data-driven assessment, they’ll suggest a plan design and entire ecosystem of benefits to address the specific needs of that member population. It’s common for employers to achieve as much as a 25% to 30% cost reduction in the first year alone, savings that can be passed along to members in the form of reduced premiums and out-of-pocket expenses.
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Whether employees will receive the care and service they need
In the past, RBP raised worries over employee satisfaction. Will employees be able to find providers who will accept the plan? Will they also experience disruptions in care or receive balance bills? Early on, these problems appeared as worrisome obstacles.
Today, RBP experts know these friction issues can arise, so they’ve proactively developed strategies to avert them. They can help establish a center of excellence approach, identifying facilities upfront that have quality outcomes and affordable prices. Another benefit to outsourcing RBP is help in negotiating direct contracts or safe-harbor agreements with local facilities, and experts provide members with care navigation so that they know where to go for specific services and how much they’ll pay at each location.
To help with member education, RBP administrators will not only host customized open enrollment sessions and member training, but also engage in ongoing member outreach and communication throughout the year.
Many of your employer clients will resist making a change unless absolutely necessary. In the coming months, COVID-19 may serve as that catalyst, since the pandemic is projected to drive costs up at a steeper rate. This may cause companies to consider switching to a more innovative strategy like RBP. Advisers should prepare by acquainting themselves with this model’s new-and-improved approach and aligning themselves with the right RBP partners.
