Reference Based Pricing Insurance Plans

Referenced based pricing( RBP ) is a new concept in health insurance plans to lower the cost of health insurance premiums without reducing benefits.   The concept is that the insurance company or entity, negotiates hospital claims for all hospital services by their members.   Instead of a traditional network of hospitals, with contracted rates, for their members the insurance carrier negotiates the bills with the hospitals at referenced based pricing, which is calculated based on what Medicare would pay the claim. 

Depending on the hospital, the claim may get paid at 100% of what Medicare would pay or it can go as high as 200% of what Medicare would pay.   This model allows for significant savings over the traditional model of contracted rates and a traditional network of hospitals.   Savings are usually up to 35% in premiums for similar benefits of a traditional plan.   

 The newest of these plans called 3rd generation RBP plans incorporates a traditional network for the major medical and prescription parts of the health insurance plans, to allow for easy access and for a similar experience for their members for non hospital treatment.   Early RBP plans, 1st and 2nd generation plans had a poor experience for members because of balanced billing issues by providers,  this has been virtually eliminated for the new 3rd generation plans.  Third generation RBP plans could be the future of health insurance, time will tell.