Sep 10 2014 | Patti Pina

It’s your usual trip to the grocery store. You usually look at the prices, compare products and seek the best deal. This time, however, something is very different. Nothing on the shelves has a price listed. How do you determine the best value for your dollar? How can you compare products? There is no way to know how much to pay until it’s actually time to pay. Sounds foolish? Astonishingly, this is the status quo when we shop for health care services. Buyers have no idea about cost or value.

Hospitals and facilities know their costs for treatment and services, but consumers are in the dark until they receive their bill. Often, there are price variations for the same health care services, even within the same geographic location and network. Today, some employers/sponsors are trying to shed light on this situation and get a better handle on transparency by implementing reference-based pricing.

How Reference-based Pricing Works
 Employers/sponsors survey what providers are charging for a specific treatment or medication (e.g., cholesterol test, colonoscopy, MRI, hip replacement) and then address price variances by placing a cap – or reference price – on the maximum they will pay for that treatment or service.

For example, if a cholesterol test ranges from $10 to $100, an employer may set the reference price at $30. If a patient receives a cholesterol test from a provider and the cost is below the reference price, regular benefits apply; however, if the patient receives the test from a provider and the cost is above the reference price, the patient is responsible for any costs above the reference price.

Reference-based Pricing Concerns

Potentially, scaling referenced-based pricing to hundreds of procedures is not viable.Patients will not seek out the information and knowledge necessary to judge the merits of different prices.

There is a perception that higher prices mean better quality.

What Employers Need to Know

Know how to determine the reference price. If reference prices are set high, consumers will have many providers to choose from that are below the reference price, and fewer providers will have an incentive to lower prices. If reference prices are set low, consumers will have fewer providers to choose from that are at or below the reference price.Know how to clearly communicate about reference-based pricing. Employers will also want to be sure that any reference-based pricing program can be clearly and effectively explained to employees. They should provide decision support tools that are simple to use and that explain differences among multiple different providers and provide accurate and complete information about costs and quality.

What Consumers Need to Know

Know the costs upfront. The health law caps what consumers are required to pay annually toward in-network care through deductibles or other cost sharing ($6,350 for an individual or $12,700 for a family). However, if a consumer chooses a provider or service that costs more than the referenced price, those costs will not count toward that limit. (Kaiser health news.org)Know your obligation. With reference-based pricing, consumers will have much more responsibility, so they need to have time and information to shop for the best option and make the most informed decision.

Resources for Health Care Cost or Quality

Fair Health
 Fair Health is a national independent, not-for-profit corporation that provides information on health care costs and health insurance through comprehensive data products and consumer resources.

Healthcare Blue Book
 Healthcare Blue Book provides tools to help consumers quickly and easily understand what they should pay for health care services.

Hospital Compare
 Medicare’s Hospital Compare includes a variety of measures to compare specific hospitals.

Castlight Health
 Castlight Health provides applications and services that enable employers to deliver cost-effective benefits, provide medical professionals and health plans a merit-based market to showcase their services, and help employees make informed health care choices with a clear understanding of costs and likely outcomes.

Clearcost Health
 Clearcost Health enables self-funded health plan participants to search for health care providers based on cost, quality and convenience. The service provides both the total estimated cost and the participant’s out-of-pocket cost for providers who offer outpatient, non-urgent health care services, including doctor’s office visits, basic outpatient procedures, lab tests, imaging studies (X-rays, MRIs, etc.) and prescription drugs.