What is Reference Based Pricing?

Reference Based Pricing (RBP) is a healthcare cost containment strategy that some employers and health plans use to control healthcare expenses. Under RBP, rather than negotiating with a network of healthcare providers for predetermined reimbursement rates, the plan sets a pricing "reference" point, often based on a specific percentage above a widely recognized pricing benchmark, such as Medicare rates or a specific percentile of provider charges in a given geographic area.

When plan participants receive medical services, the plan pays providers based on this reference point. If a provider's charge exceeds the reference price, the plan may only cover up to that reference point, and any excess cost may be the responsibility of the plan participant. This approach can result in lower payments to healthcare providers and can lead to significant cost savings for employers and health plans.

However, RBP can also be complex and may require employees to carefully consider their choice of healthcare providers to avoid unexpected out-of-pocket expenses. Additionally, not all medical providers may be willing to accept RBP rates, potentially limiting the choice of healthcare facilities and professionals available to plan participants.

In summary, Reference Based Pricing is a healthcare reimbursement strategy that sets payment rates for medical services based on a reference point, often tied to a percentage above a recognized benchmark. While it can help control costs, it may require plan participants to be more involved in understanding provider charges and choosing healthcare services.

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