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The American Journal of Managed Care February 2019
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Why Aren’t More Employers Implementing Reference-Based Pricing Benefit Design?

Anna D. Sinaiko, PhD, MPP; Shehnaz Alidina, SD, MPH; and Ateev Mehrotra, MD, MPH
This qualitative study finds low employer adoption of reference-based pricing (RBP) benefit design and that redesign of RBP may be necessary to overcome barriers to adoption.

Four key themes characterized employer perspectives on adoption of RBP: (1) Although cognizant of its potential, very few employers have implemented RBP; (2) There are concerns about the complexity of RBP, employee risk of catastrophic out-of-pocket costs, and need for significant communication and decision support; (3) The business case for RBP is not compelling; and (4) Adoption of RBP may hinder retention of and competition for workers. A fuller description of each of these themes follows.

Theme 1: Although Cognizant of Its Potential, Very Few Employers Have Implemented RBP

There was universal agreement with the need to engage employees in their healthcare decision making as a component of a larger strategy to lower healthcare spending. All interviewees believed that RBP could achieve cost savings, and several noted the potential to engage employees as well (see Table 1 for illustrative quotes). However, adoption of RBP remains low. One representative comment was: “Reference pricing is more on the far end in terms of what employees and employers are actually doing.” Key barriers to RBP adoption are captured in the remaining 3 themes.

Theme 2: There Are Concerns About the Complexity of RBP, Employee Risk of Catastrophic Out-of-Pocket Costs, and Need for Significant Communication and Decision Support

RBP is perceived as being a complex benefit design and as complex to implement because employees at a single large employer often work in many different markets in the United States (see Table 2 for illustrative quotes). There was widespread concern that if all employees face a single, national reference price, employees in some markets would have poor access to providers below the reference price. Adjusting the reference price by market would address this concern but would be more difficult to operationalize and communicate to employees.

The potential for employees to face catastrophic out-of-pocket costs was another concern. Under RBP, employees treated by a high-priced provider are responsible for the entire cost above the reference price. As one interviewee noted, “The company saves money, which is great; however, the employee gets hit with that delta. So it doesn’t feel very good.” Adverse employee outcomes could also lead to negative publicity, something employers are anxious to avoid.

There was broad awareness of the need for extensive, continuous communication with and education of employees, so they would know about potential cost sharing when seeking care. Interviewees felt that making sophisticated and user-friendly supplemental decision support available through multiple communication channels (eg, telephone and web-based) was critical to help employees choose providers. Dissatisfaction with the currently available tools was one of the factors that drove employers not to offer RBP.

The few employers that offered RBP implemented extensive communication and decision-support strategies. Some conducted targeted outreach (via letters or phone calls) to employees who were scheduled to receive care at a higher-cost provider to inform them about RBP and the out-of-pocket cost consequences of their provider choice. All but 1 employer with RBP offered a “concierge” service that employees could call for help identifying a low-priced provider. The concierge was also intended to help employees communicate with providers about a high-balance bill if they got one. RBP-focused communication was separated from other benefits communications; one employer developed animated videos to describe RBP, and another printed information about RBP on office supply materials that employees worked with every day. Finally, proactive education about RBP with select referring physicians was also mentioned as a strategy to support employee choices.

Theme 3: The Business Case for RBP Is Not Compelling

The low potential savings from RBP were also a barrier. Although prior research has shown that RBP adoption may yield substantial savings for a given clinical area, the potential savings were low on net across all services. Therefore, RBP did not justify the necessary investment in communication, marketing, and decision support or the efforts to respond to employee disenchantment from more restricted benefits. One interviewee noted: “The savings were not that substantial, and the main reason is procedures are not…high-dollar procedures. [It] was going to save like $80,000 or something, and it was like, ‘OK, for $80,000, this is not worth the hassle.’ ”

In contrast, employers using RBP emphasized a mission-driven, “do-the-right-thing” motivation, noting that RBP was the beginning of a longer journey toward improving the value of healthcare spending. They said, for example, “There’s more to it than just saving money. It’s about saving money the right way.” These employers also noted that starting with a small RBP program, despite low savings, allowed for the close monitoring of the program (eg, providing support for employee travel when necessary, allowing for exemptions for nonroutine cases) to ensure acceptable levels of quality and access are maintained.

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