Plans Place Spending Caps to Reduce Costs

While reference pricing helps contain costs for insurers, it pits patients between the payer and provider.

Aiming to contain healthcare costs, a growing number of employers and insurers are adopting a strategy that limits how much they'll pay for certain medical services such as knee replacements, lab tests, and complex imaging. A recent study found that savings from such moves may be modest, however, and some experts question whether "reference pricing," as it's called, is good for consumers.

The California Public Employees' Retirement System (CalPERS), which administers the health insurance benefits for 1.4 million state workers, retirees, and their families, has one of the more established reference pricing systems. More than 3 years ago, the agency began using reference pricing for elective knee and hip replacements, 2 common procedures for which hospital prices varied widely without discernible differences in quality, says Ann Boynton, CalPERS' deputy executive officer for Benefit Programs Policy and Planning.

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