The Health Insurance “Hack” That Pays Doctors a Percentage of Medicare Rates (And Skips the PPO).
My Company Fired Blue Cross and Cut Our Health Costs by 30%.
My company was being crushed by the rising cost of our PPO health plan. So, they switched to a “Reference-Based Pricing” (RBP) model. Instead of a PPO network, the plan now pays doctors a fixed, generous percentage (like 150%) of the Medicare rate for any given service. We can go to any doctor we want. Because the Medicare rate is a fair, transparent price, and not an inflated PPO “discount,” this simple switch cut my company’s total healthcare spending by nearly 30% in the first year. It felt like a revolutionary hack.
Reference-Based Pricing (RBP): The Revolutionary Way to Cut Healthcare Costs by 30%.
Exposing the “Fake” Discounts of a PPO.
Reference-Based Pricing is a radical new approach to employer health plans. It completely rejects the traditional PPO network model. Instead of relying on secret, “negotiated” discounts off of a hospital’s ridiculously inflated prices, an RBP plan simply pays a fair, transparent price based on a reference point—usually the price that Medicare pays. This exposes the fact that a PPO “discount” is often just a small reduction on a price that was marked up by 1000% to begin with.
The Risk of “Balance Billing”: What Happens When a Doctor Doesn’t Accept the RBP Rate?
The Achilles’ Heel of the RBP Model.
This is the single biggest risk of an RBP plan. Because there is no PPO contract, a hospital or doctor can, in theory, reject the plan’s payment and send you a “balance bill” for the difference. For example, if the hospital bills $10,000 and your RBP plan pays them $3,000, they could try to bill you for the remaining $7,000. This is a real risk, but good RBP plans have a secret weapon to fight it.
PPO Networks are a Lie. How “Negotiated Rates” Are Still Massively Inflated.
The Illusion of a “Good Deal.”
For years, we’ve been told that PPO networks give us great “negotiated rates.” But it’s often an illusion. A hospital might have a “chargemaster” price of $20 for an aspirin. The PPO network “negotiates” that down to $8. You feel like you got a discount. But the real, underlying cost (the Medicare rate) is only 50 cents. RBP skips the game entirely and just pays a fair price based on the real cost, exposing the PPO “discount” as a marketing gimmick.
How RBP Exposes the Absurd Pricing of American Hospitals.
The Power of Price Transparency.
The entire RBP model is built on the idea of price transparency. It starts with a simple question: “What is a fair price for this service?” It uses the Medicare reimbursement schedule—a massive, publicly available database of what it costs to provide medical services—as its foundation. By doing so, it shines a bright light on the absurd, arbitrary, and often secret pricing games that hospitals play, and it refuses to participate in them.
Is RBP the Future of Health Insurance for Self-Funded Companies?
A Powerful Tool for Employers Who Want to Take Control.
For large, self-funded employers who are tired of the endless, double-digit premium increases from traditional insurance carriers, Reference-Based Pricing is a powerful and growing movement. It allows them to take back control of their healthcare spending, cut out the expensive PPO middleman, and bring a level of transparency and rationality to their health plan. It is a disruptive and innovative model that is rapidly gaining traction in the world of employee benefits.
The Patient Advocacy Services That Come With an RBP Plan to Protect You from Balance Bills.
The Secret Weapon That Makes RBP Work.
A good RBP plan doesn’t just leave you to fight balance bills on your own. They come with a robust patient advocacy service. If you receive a balance bill, a team of experts and lawyers immediately steps in on your behalf. They negotiate with the hospital, citing data on fair market prices, and they have an incredible track record of getting these bills significantly reduced or eliminated entirely. This advocacy service is the essential component that makes the RBP model viable and safe for employees.
A Tale of Two Knee Replacements: One on a PPO, One on an RBP Plan. The Cost Difference is Insane.
Same Surgery, Same Hospital, Radically Different Price.
Two employees at the same company had the same knee replacement surgery at the same hospital. One was on the old PPO plan. The hospital billed $80,000, and the PPO’s “negotiated rate” was $45,000. The other employee was on the new RBP plan. The plan paid the hospital 150% of the Medicare rate, which came to $18,000. The company saved $27,000 on that one single procedure. It’s a real-world example of the massive, hidden waste in the PPO system.
The Disruptive Model That Traditional Insurance Carriers Are Terrified Of.
It Pulls Back the Curtain on Their Entire Business Model.
Traditional insurance giants like Blue Cross and UnitedHealthcare have built their empires on the PPO network model. Their “value proposition” is their network and their negotiated discounts. Reference-Based Pricing completely sidesteps this. It says, “We don’t need your secret network deals. We’re just going to pay a fair, transparent price.” This is an existential threat to the traditional carriers’ business model, and they are terrified of it.
Cutting Out the Middleman: How RBP Goes Straight to the “Real” Price of Care.
The Shortest, Smartest Path to Paying a Fair Price.
Think of a PPO as a long, winding road with lots of toll booths (the “negotiated discounts”). RBP is like a brand new, direct highway. It ignores the winding, expensive old road and goes straight to the destination: a fair and reasonable price for care, based on a transparent, publicly available reference point. It cuts out the PPO middleman and the pricing games, creating a more efficient and honest way to pay for healthcare.