Reference-Based Pricing To the Rescue

Almost everyone has heard stories about unsuspecting patients being coerced into paying whatever astronomical price the medical industry claims their care is worth.

Often even if someone has health insurance from a major provider, the billing process can go dramatically wrong.

In 2015, Reuters published a study sharing that hospitals routinely markup the costs of care by 1,000%. That is bad enough when you have health coverage, but even worse if your workplace doesn’t provide it.

The Atlanta Journal-Constitution shared the story of Drew Sheward, who faced a bill in excess of $23,000 after having an emergency appendectomy. That amount was four times the flat rate of care Medicare usually charges for the same procedure. 

Sometimes even insurance isn’t enough to protect someone from these outrageous markups.

NPR reports that Sherry Young, who was insured by BlueCross BlueShield in Oklahoma, got a $115,000 bill for surgery--$15,000 of which was just for four small screws. Her insurance initially stated that they wouldn’t cover the surgery since they didn’t deem it medically necessary.

Pressing the matter eventually led to getting the procedure covered, but only after acquiring an itemized list and putting pressure on both the hospital and Young’s insurer.

These are exactly the kinds of life-halting difficulties that reference-based pricing can eliminate.

By using the standard Medicare cost for a given procedure as a baseline and agreeing to pay a certain percentage above, reference-based pricing reaches a happy medium for businesses wanting to provide their employees with quality care and hospitals who are accustomed to a certain profit margin.

Self Funding Success shares that reference-based pricing is saving many employers up to 30% on health care, and that's a number we can attest to at Captiva Benefit Solutions.

The lower costs allow businesses to pass those savings on to their employees in turn, offering them a wider range of care and eliminating the risk of crippling markups.

Where are all those savings breaking down for employees? The Society of Human Resource Management summarizes:

“Savings from reference pricing materializes through the combination of 1) patients choosing providers at the reference price, 2) patients paying the difference between the reference price and the allowed charge through cost sharing, and 3) providers reducing their prices to the reference price.”

Another benefit to this method is its high level of customizability.

Employers can choose to focus on making sure that certain kinds of preventative care are provided for everyone in the workplace. Employees, in turn, are offered much more clarity and transparency on their care costs.

The battle for itemized lists becomes a relic of the past, and patients are allowed a lot more agency in understanding and selecting the right care for their needs.

These are exactly the kinds of solutions that Captiva is dedicated to bringing your company with our reference based pricing model.

To find out how this could benefit you and your team, contact Captiva today!

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