Employers Are Aware of Reference-Based Pricing Potential but Haven't Crossed Over to Adoption, Researchers Report in AJMC® Study

(CRANBURY, N.J. — February 12, 2019) - Few employers are using reference-based pricing (RBP) benefit design, even though there is broad awareness of its potential for delivering savings, according to a qualitative study published in the February issue of The American Journal of Managed Care®.

The authors, from Harvard T.H. Chan School of Public Health, Harvard Medical School, and Beth Israel Deaconess Medical Center, sought to understand employers’ point of view about RBP as a strategy to engage employees in healthcare decision making, as well as their adoption of and concerns about this type of benefit design.

Under RBP, employees have a financial incentive to use lower-cost providers, usually for nonemergent medical services where a large pool of providers is available. The plan determines a “reference price” for a given medical service, and the plan will cover medical expenses for that service up to the reference price. If a patient chooses a provider whose negotiated price with the plan is above the reference price, the patient is responsible for all costs above the reference price, including all cost sharing.

The paper, “Why Aren’t More Employers Implementing Reference-Based Pricing Benefit Design?” identifies the roadblocks to adopting RBP, as well as three strategies that might boost participation in RBP.

Employers identified several concerns that kept them from implementing RBP designs, including plan complexity, fear of catastrophic out-of-pocket costs, and worries that RBP could hurt employee recruitment in a tight labor market.

“Our interviews revealed that although employers were aware that RBP could lower spending, the difficulty they expected to face to put RBP in place and the possible risks for employees, both current and future, left them deciding it was not worth it,” said lead author Anna D. Sinaiko, PhD, MPP, of Harvard T.H. Chan School of Public Health.

Simplifying the plans, setting out-of-pocket maximums to protect patients from catastrophic costs, and using “turnkey” solutions for communicating the changes to employees could help increase uptake of RBP plans, the authors wrote.

“Solutions that can eliminate employers’ biggest concerns about RBP, such as these, are likely needed if there is to be broader uptake of RBP benefit design than what we are currently seeing in the market,” Sinaiko said.

For the full February issue, click here.

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