Let's cut through the noise. Reference based pricing (RBP) is exactly what it sounds like: you pay healthcare providers based on a reference point: typically a percentage above Medicare rates: instead of whatever inflated number a traditional PPO network negotiates (or doesn't negotiate).
It's not for everyone. But if you're tired of watching premiums climb 8-12% every year while carriers shrug and say "that's just how it is," RBP might be the shake-up your group needs.
How Reference Based Pricing Actually Works
Here's the traditional PPO model: insurance carriers negotiate "discounts" with provider networks. A hospital charges $50,000 for a surgery. The carrier "negotiates" it down to $40,000 and calls it a win. You pay premiums based on those $40,000 price tags, plus the carrier's profit margin, plus administrative bloat.
Reference based pricing flips that script entirely.
Instead of relying on a carrier's network, your company (through a third-party administrator, or TPA) sets a fair reimbursement rate: usually 120% to 300% of what Medicare pays for the same service. If Medicare reimburses $6,000 for that surgery, your plan might pay $12,000 at a 200% benchmark.
That's not a typo. We're talking about paying $12,000 instead of $40,000 for the exact same procedure, performed by the same surgeon, in the same facility.
Your employees can see any provider they want. No narrow networks. No "Tier 1 vs. Tier 2" nonsense. They choose the doctor, and the plan pays based on a clear, transparent formula tied to Medicare's rates.
The Savings Are Real (And They're Substantial)
Most employers using reference based pricing see 20-40% savings annually on their medical spend. We're not talking about switching from brand-name to generic drugs or adding a wellness program. We're talking about fundamentally changing how much you pay for healthcare services.
Let's use real numbers. A mid-sized company with 150 employees spends roughly $1.8 million per year on health insurance. With RBP, that same company could save $360,000 to $720,000 annually.
That's not found money sitting in a budget line. That's real savings you can reinvest in your business, pass along to employees through better benefits, or use to actually grow your company instead of feeding the insurance industrial complex.
The Part Nobody Likes to Talk About: Balance Billing
Here's where it gets messy, and here's where most brokers bail on the conversation because they don't want to deal with the fallout.
When you pay a provider 150% of Medicare and they wanted to charge 400% of Medicare, they're not always thrilled. Some providers will try to "balance bill" your employee: meaning they'll send a bill for the difference between what your plan paid and what they wanted to charge.
A hospital bills $45,000. Your RBP plan pays $15,000 (at 250% of Medicare). The hospital sends your employee a bill for the remaining $30,000.
This is the moment most employers panic and most brokers disappear.
This is where Total Benefit Solutions earns our keep.
We Don't Let Providers Bully Our Clients
Here's the truth about balance billing: it's a negotiation tactic, not a legal obligation. In most cases, providers will accept the reference-based payment if someone pushes back hard enough.
Most employers don't know how to push back. Most brokers don't want to deal with the phone calls.
We do both.
When a provider tries to balance bill one of our clients' employees, we step in immediately. We review the claim, verify the payment was fair based on Medicare benchmarks, and we negotiate directly with the provider on behalf of the employee. We know the rules. We know the leverage points. And we don't back down when a hospital billing department tries to intimidate someone into paying an inflated bill.
In the rare cases where a provider refuses to budge, most RBP plans include "gap coverage" or a stop-loss provision that protects the employee from catastrophic out-of-pocket costs. Your employees are never left holding the bag while we fight on their behalf.
This is non-negotiable for us. If a broker is selling you on RBP but doesn't have a clear, aggressive strategy for handling balance billing disputes, walk away. You need someone willing to fight the fights that matter.
Is Reference Based Pricing Right for Your Group?
Let's be honest: RBP isn't a plug-and-play solution for every employer. It works best in specific situations, and if your broker isn't asking the right questions upfront, you could end up in a mess.
RBP works well if:
- You're self-funded (or willing to move to self-funding)
- You have at least 50-100 employees with predictable claims patterns
- Your workforce is spread across multiple states or doesn't rely heavily on a single hospital system
- You're willing to invest in employee education upfront so they understand how the plan works
- You have a broker (like us) who will actively manage provider disputes and advocate on your behalf
RBP might not work if:
- You're a small group under 50 employees (self-funding gets risky at that size)
- Your employees need frequent specialized care from a single academic medical center that refuses to negotiate
- You want a "set it and forget it" health plan with zero involvement
- Your workforce isn't comfortable navigating a plan that requires more engagement than a traditional PPO
The reality? Most mid-sized employers (50-200 employees) are perfect candidates for reference based pricing, but they've never heard of it because traditional carriers don't offer it. Why would they? It cuts into their profit margins.
The Bottom Line
Reference based pricing isn't about cutting corners or offering "worse" coverage. It's about refusing to overpay for the same services your employees are already receiving.
It challenges the entire premise of the traditional PPO model: the idea that you need a carrier to "negotiate" on your behalf when those negotiations consistently result in prices 300-400% above Medicare rates.
With RBP, you set the rules. You decide what's a fair price based on objective benchmarks (Medicare rates). And when providers push back, you have someone in your corner who knows how to push harder.
Does it require more active management than a traditional plan? Yes. Does it require a broker who's willing to take phone calls and fight billing disputes? Absolutely. Is it worth saving $300,000 to $700,000 per year? That's a question only you can answer.
But if you're ready to stop accepting 10% annual rate increases as inevitable, and you want a health plan built around transparency instead of hidden margins, reference based pricing is worth a serious conversation.
Ready to See If RBP Works for Your Group?
We won't sell you on reference based pricing if it's not the right fit. But we will run your claims data, show you what you'd pay under an RBP model, and give you a clear picture of potential savings: and potential challenges.
If it makes sense, we'll build the plan and handle every balance billing dispute that comes up. If it doesn't make sense, we'll tell you that too and find a better solution.
Contact Total Benefit Solutions:
Website: totalbenefits.net
Phone: (203) 755-5009
Let's talk about what your group is actually paying for healthcare: and whether you're getting a fair deal.