If you’re a small to mid-sized business owner, you’ve likely watched your health insurance premiums climb year after year. You’re doing everything right: managing your overhead, growing your team, and taking care of your customers: yet your "second largest expense" keeps eating into your profit margins. It’s frustrating, and frankly, the traditional insurance model feels rigged against you.
At Total Benefit Solutions, we don’t believe you should have to choose between providing quality benefits and keeping your business profitable. There is a better way to do this, and it’s called Reference Based Pricing (RBP).
If you have three minutes, I can explain exactly how this "secret" works and why it’s becoming the go-to strategy for determined employers who are tired of the status quo.
The Problem: The "Black Box" of Traditional Insurance
In a traditional PPO or HMO plan, you are at the mercy of negotiated discounts. An insurance carrier tells you they’ve negotiated a "40% discount" off a hospital’s bill. But 40% off of what?
Hospitals use something called a "chargemaster": a list of highly inflated prices that have no basis in the actual cost of care. If a hospital charges $50,000 for a procedure that costs them $5,000 to perform, a 40% discount still leaves you paying $30,000. That’s not a deal; that’s a rip-off.
Reference Based Pricing flips this script. Instead of starting with an arbitrary, inflated number and negotiating down, RBP starts with a transparent, objective benchmark and adds a fair profit margin on top.
What Exactly is Reference Based Pricing?
Reference Based Pricing is a self-funded health plan strategy where the employer pays providers based on a "reference point": usually what Medicare pays for that same service.
Think about it this way: Medicare is the largest purchaser of healthcare in the world. They have spent decades figuring out exactly what a knee replacement, an MRI, or a blood test actually costs to produce. When we use RBP, we tell the provider, "We know Medicare pays you $1,000 for this service. We want to be fair and ensure you make a profit, so we will pay you Medicare plus 20% (or $1,200)."
By using an objective benchmark, you eliminate the "hidden" markups that traditional insurance carriers ignore. This isn’t just a minor tweak to your plan; this is a fundamental shift in how you buy healthcare.
The 3-Minute Breakdown: How It Works
If you’re looking for the "too long; didn't read" version, here it is:
- You Go Self-Funded: You stop paying fixed premiums to a massive insurance carrier and instead pay for the actual claims your employees incur.
- The Benchmark is Set: Your plan defines its payment limits based on a percentage of Medicare (usually 120% to 150%).
- The Claim is Repriced: When an employee goes to the doctor or hospital, the provider sends the bill. A Third-Party Administrator (TPA) reprices that bill based on your reference point.
- You Save Money: Because you aren't paying the inflated "chargemaster" rates, you typically see savings of 15% to 30% compared to traditional plans.
It sounds simple because, at its core, it is. You are paying a fair price for a service, just like you do for every other part of your business. If you’ve ever heard of reference based pricing but weren't sure how it applied to you, this is the foundational logic.
Why Small and Medium Businesses are Switching
For years, RBP was a "big company" secret. Only the giants with thousands of employees had the resources to set up these plans. But today, the market has evolved. Total Benefit Solutions specializes in bringing these sophisticated strategies to smaller employers who need them most.
The advantages are undeniable:
- Massive Cost Savings: Most employers see an immediate reduction in their total spend.
- Full Transparency: You see exactly where every dollar goes. No more "hidden" carrier fees or opaque pharmacy rebates.
- Freedom of Choice: In most RBP plans, there are no "out-of-network" penalties. Employees can see any provider they want, as long as that provider accepts the payment.
The Elephant in the Room: Balance Billing
If you’ve done any research on RBP, you’ve probably heard about "balance billing." This happens when a hospital doesn't like the "Medicare plus" payment and sends a bill to the employee for the difference.
This is where many employers get nervous. They don’t want their employees stuck with a $5,000 bill after a surgery. And they shouldn't be.
This is also where the choice of your partner matters most. At Total Benefit Solutions, we don’t just set up the plan and walk away. We act as a determined advocate for your team.
The Total Benefit Solutions Advantage: Advocacy in Action
We know that RBP only works if your employees feel protected. If an employee gets a balance bill, they shouldn't be the ones calling the hospital to argue about Medicare reimbursement rates. That’s our job.
We work with TPAs and legal teams who specialize in member advocacy. If a provider attempts to balance bill, our partners step in to negotiate directly with the hospital. In the vast majority of cases, these bills are resolved legally and professionally without the employee ever having to pay a dime extra.
We make sure that:
- Employees are Educated: We provide clear onboarding so your team understands how the plan works. You can see how we handle onboarding employees here.
- Savings Stay with You: We ensure the math actually works in your favor, so the savings aren't eaten up by administrative fees.
- No One is Left Stranded: We are your boots on the ground, making sure your employees are treated fairly by the healthcare system.
Is RBP Right for Your Business?
RBP is a powerful tool, but it’s not a "set it and forget it" solution. It requires an employer who is determined to take control of their costs and a broker who is willing to do the heavy lifting.
You might be a good candidate for RBP if:
- You have at least 15-20 employees.
- You are tired of 10% or 15% annual premium increases.
- You want to offer your employees more flexibility in choosing their doctors.
- You are comfortable moving away from the "big name" insurance carriers to gain better financial control.
The regulatory landscape is also shifting in favor of this model. We’ve seen states like Oregon and Montana implement RBP for public employees with great success. Even in 2025 and 2026, new legislation in states like Washington is paving the way for more transparent pricing. The "secret" is getting out, and the early adopters are the ones reaping the most significant financial rewards.
Taking the First Step Toward Real Savings
Transitioning to a Reference Based Pricing model can feel like a big leap, but you don't have to do it alone. It’s about more than just changing a plan design; it’s about reclaiming your company’s bottom line.
Whether you are looking into how an HRA works to supplement your plan or you are ready to overhaul your entire benefits strategy, we are here to help you navigate the complexity.
The healthcare industry isn't going to lower its prices out of the goodness of its heart. You have to be proactive. You have to be determined. And you have to have the right partner in your corner.
Ready to see the numbers?
If you’re curious about what your specific savings could look like under a Reference Based Pricing model, let’s talk. We can run the analysis and show you exactly how RBP compares to your current fully insured plan.
Contact Total Benefit Solutions today:
Visit us at totalbenefits.net
Call Ed MacConnell and the team at (215) 355-2121
Or reach out directly through our contact page.
Don't let another year of "traditional" insurance drain your resources. Let’s build a benefits plan that actually works for your business.