By: Jon Jablon, Esq.
Plan sponsors of self-funded health plans have a lot to think about. From deciding which services to cover to making tough claims determinations, there are lots of moving parts to consider and be mindful of. Plans that utilize reference-based pricing are in the same boat, of course, except they have added even more moving parts to their benefits programs.
As many plans that use reference-based pricing are aware, some claims need to be settled with providers to eradicate balance-billing. A claim initially paid at 150% of Medicare may need to be ultimately paid at 200%, for instance, pursuant to a signed negotiation between the health plan and the medical provider. Fast-forward two months later, to when the plan receives notice from its stop-loss carrier that the carrier is only considering 150% of Medicare to be payable on the claim, and the extra 50% of Medicare (which can be a significant amount!) is excluded.
When the plan asks why it isn’t receiving its full reimbursement, the carrier quotes its stop-loss policy and the plan document. The former provides that the carrier will only reimburse what is considered Usual and Customary – and the latter provides that Usual and Customary is defined as 150% of Medicare, by the Plan Document’s own wording. The carrier’s liability, therefore, is limited to 150% of Medicare. The plan’s has chosen to pay more than that. Even though it’s for a very good cause, the stop-loss insurer may deny that excess payment amount. In this example, there is a “gap” between the plan document and stop-loss policy such that the plan has paid a higher rate than what the carrier is obligated to pay.
For this reason, it is so incredibly important for plans that are using reference-based pricing to talk to their stop-loss carriers. Some carriers will say “we don’t care – your SPD says 150%, so we’ll reimburse 150%,” but other carriers will say “we understand that reference-based pricing saves us money, and we understand that it’s not always as simple as paying 150% and walking away – so we’ll work with you in terms of reimbursement.” Other carriers still will agree to place a cap on reimbursements higher than what’s written in the Plan Document; in other words, if the plan provides that it’ll pay 150% of Medicare, the carrier may agree to reimburse settlements up to 200% of Medicare, if applicable and if necessary.
There are lots of options for how a stop-loss carrier might react to reference-based pricing, and the only way to find out is to have a conversation. If you don’t ask, you’ll never know (until it’s too late, that is).
Moral of the story? If you’re going to adopt reference-based pricing – whether full network replacement, carve-outs, out-of-network only, or any other type – put stop-loss high up on the laundry list of considerations.
In this episode, The Phia Group chats once again with one of their Partners in Empowerment, Gregory S. Everett, President and CEO of Payer Compass. Greg addresses all of our hosts’ questions regarding reference based pricing, balance billing, the value of physician networks, and the future of RBP.
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By: Jon Jablon, Esq.
Reference-based pricing (or RBP) tends to be one of those things that there’s little ambivalence about; in general, if you are acquainted with reference-based pricing, you either love it or hate it. And, like so many hot topics, some of the intricacies are not quite clear. That’s partially due to the sheer complexity of the industry and reference-based pricing in general, but also partially due to the competing sales efforts floating around. Since the RBP stew has so many ingredients, like any stew recipe, there are tons of different ideas of what makes a good stew – but that also means it’s fairly easy to cook a bland one.
Some have historically advocated sticking to your guns and never settling at more than what the SPD provides. This is a mentality that has largely dissipated from the industry, but some still hold it dear, and many plan sponsors and their brokers adopt reference-based pricing programs with the expectation that all payments can be limited to a set percentage of Medicare with no provider pushback. That can best be described as the desire to have one’s stew and eat it too; in practice, it’s not possible for the Plan to pay significantly less than billed charges while simultaneously ensuring that members have access to quality health care with no balance-billing. The law just doesn’t provide any way to do that.
Plans adopting reference-based pricing programs should be urged to realize that although it can add a great deal of value, reference-based pricing also necessarily entails either a certain amount of member disruption, or increased payments to providers or vendors that indemnify patients or otherwise guarantee a lack of disruption. It is not wise, though, to expect that members will never be balance-billed, and that the Plan will be able to decide its own payment but not have to settle claims. Provider pushback can be managed by the right program, but unless someone is paying to settle claims, there is no way to avoid noise altogether and keep patients from collections and court.
Based on all this, it has been our experience that reference-based pricing works best when there are contracts in place with certain facilities. Steering members to contracted facilities provides the best value and avoids balance-billing; when a provider is willing to accept reasonable rates, giving that provider steerage can be enormously beneficial to the Plan. Creating a narrow network of providers gives the Plan options to incentivize members, and gives members a proactive way to avoid balance-billing.
There are of course other ingredients that need to go into the RBP stew – but having the right attitude is incredibly important, and knowing what to expect is vital. Expectations are the base of the stew; you can add all the carrots (member education?) and potatoes (ID card and EOB language?) you want – but if the base is wrong, then the stew can’t be perfect.
By: Jon Jablon, Esq.
Reference-based pricing is a huge hot topic in the industry today, and different entities have very different ideas of how to accomplish a given health plan’s RBP goals. Doing it right isn’t difficult, especially when you have the right partners on your side – but doing it wrong is even easier. Here are a few of the most common RBP “bloopers and blunders.”
Lack of preparation: poor (or no) supporting SPD language
A health plan’s rights are only as good as its language. This is true regarding subrogation, assignments, and many other facets of plan benefits and administration – but it is especially true, and immediately noticeable, in the context of the plan’s payment parameters. Since RBP necessarily entails changing the way the health plan pays claims, the plan language must reflect how the Plan Administrator will adjudicate allowable amounts for claims submitted to the plan. If the language is vague, ambiguous, or unsupportive, the plan is giving medical providers the ammunition they need to invalidate the plan’s RBP-based payment determinations.
Looking at claims in a vacuum: applying RBP payments to contracted claims
Simply put, if a health plan has agreed to a contract, it must follow that contract, or prepare for the consequences. If a plan wants to use a reference-based pricing methodology, it should ensure that it doesn’t have contracts that require claims to be paid at a higher amount. One of the biggest issues we see is when a health plan pays a claim based on Medicare rates because it is payment the plan has deemed reasonable – only to later encounter pushback from a provider that asks, “what about our contract?” The world of insurance is a world full of contracts – especially self-funded insurance, where plans have to arrange their service agreements themselves rather than relying on an insurer to handle everything for them. Ignoring contracts is one of the most problematic things there is for a self-funded health plan.
Not knowing your audience: refusing to settle claims with providers (or choosing too-low standards)
Calling someone’s bluff when negotiating can be a useful tactic at times, but be aware that medical providers have the right to send patients to collections or even sue them. Calling a hospital’s bluff would be a more enticing prospect if not for the fact that the patient’s credit is held hostage – and unlike in Bruce Willis or Denzel Washington movies, hostages do sometimes get hurt… Just because the health plan may have the right to walk away from the bargaining table doesn’t mean it’s a good idea.
Not knowing all the options: thinking RBP is all or nothing
When looking into a reference-based pricing option, many TPAs, brokers, and health plans have the impression that they either use RBP, or they don’t. The reality is that there are other options out there! For some plans, physician-only networks and narrow networks will help the plan achieve its goals without the burden of “full” RBP; for many plans, though, the out-of-network option is the best way to go. If the plan accesses a provider network that adds significant value for the plan, and one that members are well-accustomed to, then perhaps losing that network access would not be the best route to take.
The bottom line is that the self-funded industry contains various vendors and consultants that can offer reference-based pricing guidance and options to suit every health plan’s needs. Feel free to contact The Phia Group to learn more.