How Reference-Based Pricing Works
Reference-based pricing (RBP) pays providers a fixed percentage of Medicare rates — typically 140–200% of Medicare — rather than negotiated network rates. Because Medicare rates are publicly available and hospitals are required to accept Medicare, RBP creates a transparent, defensible pricing standard.
The Balance Billing Challenge
The primary challenge with RBP is balance billing — when a provider bills the member for the difference between the RBP payment and the provider's billed charges. RBP programs must include robust member support to handle balance billing disputes, including a dedicated advocacy team that negotiates with providers on the member's behalf.
Watch Out
RBP without strong member support is a recipe for employee dissatisfaction and litigation. Members who receive balance bills of $5,000–$50,000 and do not have a clear path to resolution will be angry — and rightfully so. Before implementing RBP, confirm your vendor has a proven track record of resolving balance billing disputes and protecting members from financial harm.
RBP Implementation Strategy
- Start with facility claims only — physician RBP is more complex and generates more disputes
- Choose a vendor with a strong track record of balance billing resolution
- Develop a comprehensive employee communication plan before implementation
- Implement a member advocacy hotline for balance billing disputes
- Monitor member satisfaction and balance billing rates monthly
- Have ERISA counsel review your RBP program for compliance