WordPress Category: Medicare
If you walked into a car dealership and the salesperson told you the MSRP for a basic sedan was $450,000, but "just for you," they could offer a 90% discount to bring it down to $45,000, you’d walk out. You’d know the "retail" price was a total fiction designed to make the final price look like a steal.
Yet, this is exactly how most businesses buy healthcare for their employees today. We call it the "PPO Discount Illusion." Your insurance carrier shows you a massive "discount" on a hospital bill, but because the original starting price (the "chargemaster" rate) was astronomically high and arbitrary, you’re still overpaying.
At Total Benefit Solutions Inc, we think it’s time to stop paying "retail" for healthcare. There is a bolder, smarter way to handle employee benefits that brings transparency back to the table: Reference Based Pricing (RBP).
What is Reference Based Pricing? (The "Fair Price" Model)
Reference Based Pricing is a health plan design that tosses the traditional, opaque "negotiated network rates" out the window. Instead of paying whatever a hospital decides to charge minus a random discount, the plan pays a set, benchmarked price for medical services.
Typically, this benchmark is tied to Medicare reimbursement rates. Why Medicare? Because Medicare is the largest payer in the country and its rates are publicly available, transparent, and generally considered the "true cost" of providing care plus a modest margin.
In a standard RBP setup, an employer might pay "Medicare plus 40%." This ensures the hospital is making a fair profit (usually much higher than what they get from the government) while protecting the employer from the $50,000 appendectomy that actually only costs $8,000 to perform.
The Problem with Traditional PPO Networks
Most small to medium-sized businesses feel locked into traditional PPO (Preferred Provider Organization) networks. They believe that being "in-network" is the only way to get a good deal.
However, these networks often come with hidden costs:
- Opaque Pricing: You have no idea what a procedure costs until the bill arrives.
- Annual Premium Hikes: Carriers often hike premiums by double digits every year (the dreaded "renewal season") because they have no real incentive to lower the cost of the underlying care.
- Narrow Networks: To save money, carriers often shrink their networks, forcing your employees to leave doctors they trust.
Reference Based Pricing flips this. Because you aren't tied to a specific carrier's negotiated network, your employees can often visit any willing provider. (Wait, any doctor? Yes, usually, though some hospitals may push back, which we'll get into in a moment.)
The "Math" of Massive Savings
Let’s look at the numbers. Industry data shows that Reference Based Pricing can reduce an employer’s total healthcare spend by 20% to 30% in the first year alone. For a business with 50 employees, that could mean six figures back in the company’s pocket.
How is this possible? It’s because RBP addresses the actual cost of the claim, not just the insurance premium. When you lower the cost of the claims, the cost of the plan naturally follows.
At Total Benefit Solutions Inc, we’ve seen how these savings allow businesses to reinvest in their people. Instead of raising deductibles on your staff to cover a premium hike, you could actually lower their out-of-pocket costs because the plan is finally paying a "fair" price for services.
Meet Dr. Ben E. Fitz: Why Medicare Benchmarks Matter
A helpful tip from Dr. Ben E. Fitz: the "secret sauce" of RBP is its connection to Medicare. (Medicare is the federal health insurance program for people 65 and older.)
When we talk about "Medicare plus 140%," we are using a standard that every hospital in the country already understands. They already bill Medicare every single day. By offering them a percentage above that rate, you are effectively being their "best customer." You are paying more than the government, but significantly less than the "retail" rates that traditional insurance plans just blindly accept.
This transparency is a game-changer. It takes the guesswork out of budgeting and puts the power back into your hands as the business owner.
The Challenge: Dealing with "Balance Billing"
We won’t sugarcoat it: Reference Based Pricing is a bold move, and it does come with a specific challenge known as balance billing.
Balance billing happens when a hospital receives your "fair price" payment (say, $10,000 for a procedure) but decides they want their original "retail" price ($25,000). They might send your employee a bill for the $15,000 difference.
This is where most traditional brokers run for the hills. But at Total Benefit Solutions Inc, this is exactly where we step in.
Advocacy: The "Never Accept No" Factor
This is the most important part of the RBP puzzle. You cannot implement Reference Based Pricing without a dedicated advocate. You need someone who is willing to fight the hospital's billing department on behalf of your employees.
Our commitment is simple: We never accept "no" as an answer.
When an employee gets a balance bill, they don't have to panic. They send it to us. We act as the intermediary between the employee, the employer, and the healthcare system. We use our deep expertise in insurance regulations and federal laws (like the No Surprises Act) to negotiate that bill down or prove that the payment already made was "fair and reasonable" under legal standards.
(The No Surprises Act is a federal law passed to protect patients from many types of unexpected medical bills, and it provides a strong legal framework for RBP advocates to use.)
Is Reference Based Pricing Right for Your Business?
RBP isn’t a "set it and forget it" solution. it requires a shift in mindset and a partnership with a firm that understands the complexities of the system.
You might be a good candidate for RBP if:
- You are tired of 15% annual premium increases and want more control over your bottom line.
- You want to offer your employees more freedom to choose their own doctors without being limited by a carrier’s "narrow network."
- You have an "advocacy-first" culture and are willing to stand up for your employees' financial well-being.
- You are a small to medium-sized business looking for the same "level-funded" or "self-funded" advantages that giant corporations have used for decades.
How to Get Started
If you're ready to stop paying "retail" and start paying what healthcare actually costs, the first step is a consultation. We’ll look at your current plan, analyze your claims data, and show you exactly how much an RBP model could save your business and your employees.
Navigating health insurance rules and regulations is what we do best. Whether you're dealing with ACA plans, Medicare, or private employer benefits, we’re here to act as your advocate every step of the way.
Don't let the "Retail" healthcare system drain your company's resources. Let’s build a plan that actually works for you.
Total Benefit Solutions Inc
(215) 355-2121
www.totalbenefits.net
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