Pioneering the Price Rebellion: The Ten Commandments of RBP Adoption
Vital Tactics for Your Cost Containment Revolt
The colossal issue of healthcare affordability presents an arduous battle for businesses and employees alike. The soaring expenses in the healthcare sector not only impede access to vital medical services but also ignite an unwavering quest for groundbreaking solutions to tackle this crisis head-on. Among the myriad of strategies available, one stands out as a beacon of forward-thinking innovation: Reference-Based Pricing (RBP). Having spent two decades immersed in this field, I can personally vouch for the transformative potential of this model, which has been embraced by pioneering self-insured employers far and wide.
RBP operates by establishing a maximum or "reference" price for healthcare services, often derived from Medicare rates. As a result, employers typically pay an average of 140% to 150% of the Medicare rate, contingent upon the repricing entity’s preferred formula for reimbursement. This system revolutionizes the way healthcare costs are managed and opens up new possibilities for health plan affordability.
The traditional healthcare sector is veiled in an ominous cloud of obscurity when it comes to pricing. Both patients and payers have been in the dark about the real cost of services until after the fact. This opacity breeds inconsistencies in pricing, fosters inefficiencies, and creates a conducive environment for inflated costs and widespread fraud.
In sharp contrast, RBP emerges as a market-driven, transparent model to ascertain equitable prices for healthcare services. It provides an objective standard bypassing the convoluted and frequently perplexing nuances of the existing healthcare pricing system. RBP has gained steady traction over recent years as a means to manage skyrocketing healthcare costs and foster clear, honest pricing. It places consumers in the driver's seat, promotes price awareness, and encourages a value-based approach to healthcare consumption.
RBP programs frequently yield savings ranging from 20% to 40% for employers and employees in the first year. These impressive results, however, are not for the faint-hearted or those comfortable with their traditional HMO or PPO and reluctant to invest the necessary effort. Any half-hearted approach to RBP will lead to pitfalls. Therefore, I have distilled my experience into what I call the ten commandments of any RBP plan, ranked in order of importance, from ten to one.
Ten: A Vibrant and Committed HR Team
The launch of an RBP strategy calls for substantial commitment from the HR department. Expect to see a surge in workload by about a quarter during the first year as communication needs increase and employee questions pour in. The first six months might even bring a 50% increase in HR workload. This is not a trivial matter. Even smaller plans project savings of approximately half a million dollars in the first year alone. Given these potential rewards, it is critical for key decision-makers, namely the CEO and CFO, to invest in augmenting HR personnel to oversee the program and develop their RBP expertise.
Although your broker, TPA, and RBP repricer will provide support, the comfort of having an in-house resource available round-the-clock to handle transitional challenges is unparalleled.
Moreover, CEOs and CFOs need to understand that the HR department is not likely to spearhead the decision to adopt RBP. From their perspective, RBP brings a host of potential risks, additional responsibilities, and foreseeable challenges. Thus, the push for RBP should originate from the finance department or the executive suite. In making this decision, it is essential for them to recognize the additional workload they will be imposing on their HR team and plan for it by increasing HR staff, given the substantial savings that await.
Nine: Fortify Your Stop-loss Contract
As you traverse the RBP landscape, it's crucial that you (as an employer), your broker, and the repricer retain some flexibility to negotiate payments that might exceed the typical 150% of Medicare limit. Occasionally, you may need to pay up to or beyond 300% of Medicare to secure key specialists or expedite a critical claim. In these instances, you must ensure that your stop-loss agreement provides you with adequate protection.
Premier stop-loss providers tend to be adaptable, often willing to negotiate up to 200% or even 300% of Medicare and cover that cost, even if the original agreement was to settle at 140% or 150% of Medicare.
A word of advice: Seek a full year of runout protection in your stop-loss contract as you delve into RBP. While traditional PPO network models might be sufficiently reinsured with three to six months, the RBP landscape requires a longer buffer period. You can never predict when a medical facility might demand additional payment for a claim they perceive as unpaid or underpaid. This extended runout protection will likely prove to be a budget saver down the road.
Eight: A Pioneering CEO or CFO
RBP is not typically a journey for the risk-averse or those who crave the familiarity of the status quo. Although its adoption has noticeably increased over the past five years, the success of RBP depends on having a leadership team that is prepared, enthusiastic, and ready to take on the established giants of the insurance industry.
Seven: Communication Kings
RBP isn't a strategy that can be hastily assembled a month before open enrollment. It demands a thorough communication campaign spread over 75 to 90 days. Engage a broker and repricer who are ready and adept at reaching your employees through a variety of channels—email, apps, webinars, pre-recorded presentations, and even traditional payroll stuffers if necessary. Employees need guidance to understand the subtleties between an explanation of benefits, a bill, and a balance bill. They should be aware that any initial resistance from a healthcare provider or a front desk representative should be referred to the dedicated 800 number on their medical card.
The company's CEO should author a letter and present, either in person or through a recorded message, the potential savings of 20% to 40% that the new medical program will bring. The message should clearly translate to employees as an avenue to protect jobs, safeguard pay, and perhaps even create the opportunity for a bonus or healthcare dividend. Employees need to perceive this as a strategic move designed and implemented with their best interests in mind.
This communication flow should continue on a regular basis for the first six months of the plan year. Regular reminders for employees to consult their TPA or concierge service for any billing questions or resistance from a healthcare provider can prove invaluable.
Six: A Battle-Tested Broker
RBP represents the pinnacle of sophistication in the realm of employee benefits packages that an employer could potentially offer. This calls for a broker deeply versed in stop-loss contracts, TPAs, and the intricate dynamics of reference-based pricing. If your brokerage operates with a sales division and an account executive who handles most post-sale tasks, it's crucial that the account executive also has a solid understanding of the RBP terrain. A brokerage team used to setting up an HMO or PPO and then switching to autopilot will not serve you well in this endeavor. Your agent should manage every phase and facet of the RBP platform.
Five: An Agile, Customer-Oriented TPA
In our industry, it's often joked that our favorite TPA is the one we haven't installed yet. Being a TPA is far from an easy job. With thin margins and a high turnover rate, especially in today's economy, TPAs face significant challenges.
However, amidst this turmoil, there are a few standouts. Seek a TPA that specializes in RBP. While many might claim they can collaborate with any RBP repricer, this can be a red flag. The best TPAs typically nurture two or three RBP partnerships and manage these alliances effectively.
I recently met a TPA who works with three RBP vendors and insists on a weekly meeting for at least the first six months of the plan year to proactively address pending issues. Both the broker and the client receive invitations to these calls but are not required to participate. This type of service is characteristic of a superior TPA.
Another potential concern is considerable or recent involvement from large investment firms. When such entities inject substantial funds, their standard approach usually revolves around boosting the operational "efficiency" and short-term profitability of the TPA. This often leads to job cuts, a reduction in customer support, and restricted investment in technology to speed up immediate cash flow for reselling at optimal "efficiency". Steer clear of this situation and instead seek out a smaller, independently-owned TPA that's dedicated to the long run. Select a company that's prepared to endure short-term financial setbacks to increase staffing levels and invest in employee training, as these factors are vital for the seamless running of your RBP program.
Four: Choosing the Ideal Repricing Partner
The RBP vendor landscape is rapidly expanding, with new entrants cropping up at a staggering rate. Presently, many vendors cater to over 150 clients. However, these vendors are not uniform; significant disparities exist within the industry. While a full exploration of these differences could constitute an article of its own, consider the following factors in your evaluation:
Does the vendor offer to serve as a co-fiduciary on the plan alongside the employer?
Do they include legal support in their package for both the employer and the employee?
How comprehensive is their credit restoration program, particularly when an employee fails to engage promptly, and their credit score is affected?
Do they have in-house legal counsel, or do they rely solely on external legal advice? Is this distinction important to you?
Do they recommend using an independent concierge service, or do they insist on assuming this role?
How large is their customer service team?
Would you prefer a company that resolves more claims at a higher cost to you, reducing provider and employee resistance? Or, would you rather work with a firm that staunchly defends your pricing decisions to keep costs down and combat unjust price hikes?
Do they provide performance and pricing guarantees, and what are the details of these assurances?
Do they have or can they access a physicians-only network that can be integrated into your RBP program, if desired? Can they articulate the pros and cons of that approach for your group?
How many clients do they serve in the geographical area where you plan to implement their services? This can give an insight into their familiarity with local facilities.
Three: Legal Support
The legal environment in the world of RBP is varied. Some RBP vendors boast they have never actually been taken to court because they've managed to resolve every dispute that has come up. Conversely, I spoke to one vendor who said they are currently involved in 23 lawsuits nationwide with their legal team. The spectrum of options is broad.
Some vendors resist becoming a co-fiduciary on the plan, arguing this allows them to push harder for compromises and, should a court case arise, shift the liability solely onto the patient, leaving no deep pockets for the hospital to pilfer.
On the other hand, other companies showcase their robust in-house legal team and contracted law firms, poised and ready to defend you and your plan members when a hospital acts unfairly. These vendors typically respond to a balance bill with a swift letter, clarifying that any disputes should be directed at the plan, not the member.
Your preference for a particular approach will depend on your risk tolerance, potential employee backlash, and your willingness to challenge excessive charges from facilities treating your plan members.
Two: Balance Bill Support
All RBP vendors aid members who get balance bills, but your role is to identify those who excel at this duty and can proficiently cater to your workforce. As with your quest for a TPA, the dimensions and proficiency of the customer support team are pivotal. In addition, it's advantageous to investigate if the vendor has experienced any workforce reductions due to involvement from significant investment bodies, or if they're an independently-operated enterprise with a sturdy commitment to customer satisfaction over growth.
One: Brace for Access Challenges
While legal and billing complications can initially overwhelm those new to RBP, they're typically resolved successfully in the end. When threatened with potential legal action, hospital CFOs are reluctant to justify their exorbitant charges in comparison to Medicare rates. Almost all RBP disputes are settled before escalating to a lawsuit. This is mainly because hospitals recognize the impracticality of arguing that 400% of Medicare is a "reasonable" rate, especially when their largest payer (Medicare) only pays a quarter of that amount.
The most significant hurdle in RBP is access. On a national scale, most RBP vendors report an acceptance rate of 90% or higher. This implies that around 10% of the time, employees may face resistance from a doctor’s office or hospital. In about half to three-quarters of these instances, a smooth negotiation process resolves the issue. This leaves about 2 to 5% of cases where an access problem persists.
While five percent might appear minor, it translates to twenty individuals in a company of 400 who may not have complete coverage at their preferred doctor or facility. Importantly, this doesn't mean a total lack of access. It signifies that if the plan member insists on visiting a provider within the top ten percent of the most expensive providers in their area, they may have to pay more for that choice. HR teams often dread managing complaints from unhappy enrollees upset about limited access to their family doctor. Such situations can arise, and being ready for them is key.
In remote areas where there may be a genuine scarcity of available care, the TPA, broker, and RBP repricer should work together to increase the reimbursement to the provider or facility to ensure convenient access. This situation is not uncommon, but resolving it requires time and concerted effort.
Reference-Based Pricing presents an attractive alternative to traditional healthcare pricing strategies, advocating for transparency, consumer empowerment, competition, and sustainable healthcare costs. Support for RBP aligns with a vision of a responsive healthcare system that meets users' needs, offering hope for a fairer future in American healthcare. As RBP continues to gain traction, its full potential and long-term impact on American healthcare costs warrant thorough examination, research, and widespread adoption.