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The advantage of a 'pure' RBP over limiting RBP to non-network providers as a strategic response to the No Surprises Act

June 20, 2022
Insurance
Christine Cooper
By Christine Cooper and Jack Towarnicky

Reference-Based Pricing (RBP) is a health plan process designed to optimize cost savings. Many employer-sponsored, self-funded health plans have adopted RBP strategies for out-of-network providers to moderate excessive provider costs.

RBP is one of the fastest growing solutions in health benefits cost management. It establishes a benchmark fee schedule and payment ceiling where there is no contractual relationship with a provider. It increases stability in health care prices and point of purchase cost sharing by using Medicare reimbursement rates and other provider cost data to provide an objective cost baseline.

The No Surprises Act (NSA) covers all participants in employer-sponsored health plans and aims to provide protection from surprise medical bills for emergency services as well as care received from out-of-network providers at an in-network facility. These protections and price transparency, however, are not expected to have a significant impact on the substantial price variations across hospitals and other providers for standard procedures. For example, at the same hospital, the price for one specific procedure varied by a factor of 10, depending on the patient’s health coverage.

The Plan Administrator should be mindful about how the NSA will impact plan administration with respect to non-network providers. Simple NSA compliance is expected to increase employer-paid medical expenses and add to the cost of coverage. Furthermore, price transparency mandates will add to medical cost inflation by prompting both in-network and out-of-network providers to increase charges. Even with greater protections and transparency, significant price variations can still exist across hospitals and providers for standard procedures.

The best response is through an approach that is both strategic and compliance oriented. A dual approach will minimize the compliance challenge, reduce the cost of coverage for both the employer and employees, and, at the same time, improve both the perceived and actual value of health coverage.

The interaction of NSA and RBP
NSA and RBP intersect when limited to non-network providers, The NSA includes open negotiation and independent dispute resolution (IDR) procedures. The IDR process triggers a new risk for health plans that apply RBP only to out-of-network providers or plans that directly contract with providers and facilities. Where the plan includes contracted rates with providers, RBP may be subject to the IDR process. Self-funded plans should be aware of this risk.

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