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Intro to Reference-Based Pricing


Reference-based pricing (RBP) is an alternative to the popular network model for health insurance. Under RBP, members can see any provider they want, and all claims are treated as out-of-network. This allows the plan to determine and pay a fair price for care, rather than being obligated to pay based on network contracts, which often inflate costs. Because of this, RBP plans are able to provide significant savings for employers.


The problem with networks

Through Flume Community, we sign contracts directly with providers who agree to see all of our members at predetermined prices, set as
a percentage of Medicare reimbursements. This allows both the plan sponsor and member to know the price of an appointment ahead of time, and mitigates the risk of the member receiving a balance bill. Direct contracting also increases our ability to audit claims and catch fraud or abuse.


Basing payment on actual costs

With RBP, provider reimbursements are set as a percentage of Medicare, because Medicare rates are the best estimation of what it costs a provider to do a given visit or procedure. By paying a fixed amount more than the Medicare rate, the plan is able to cut out inflated prices, while still allowing the provider to make a reasonable profit.


The trade-offs with RBP

When done well, RBP provides significant savings on healthcare costs, and also gives employers transparency into their healthcare spending. But it does come with trade-offs. RBP plans require both the plan sponsor and members to be much more hands on, because they can’t just push the network’s “easy button” anymore. There’s also the risk that a provider might reject the RBP rate, and try to make more money by balance billing the member (see our blog post on how Flume supports members who have received a balance bill). However, it’s important to remember that balance billing is a problem for any fully insured plan, and working with a hands-on Third Party Administrator, rather than a carrier, often means that members will get much better support if a billing issue does arise.

Self-funded Open Access plans deliver unparalleled savings by doing away with inefficient networks, limiting unreasonable prices, and contracting directly with providers. As plan sponsors and  employees become more comfortable with the various elements of self-funding, we’re able to gradually move the plan toward open access at a pace everyone is comfortable with. We recommend plan sponsors pursue a proposal from each of the columns in the chart below.

Flume Health is committed to providing members with seamless, affordable health coverage. If you have any issues or questions about your plan, call the Flume Concierge at 1-844-MyFlume.