More employers now price care as a percent of Medicare instead of a discount off inflated billed charges. There are two very different ways to do that, and they get confused all the time.
Direct contracts. The plan, or its TPA, signs an agreement with a hospital or physician group to pay a set rate, for example 150 percent of Medicare. The provider agreed to that price in advance, so it accepts the payment and cannot balance bill your employee beyond their normal deductible and copays.
Reference-based pricing (RBP). The plan pays a set percent of Medicare with no contract in place. Because the provider never agreed to that price, it can refuse the payment and send the difference to your employee as a balance bill. That is the real risk.
So is RBP risky? It can be. It can also save real money. A good RBP program comes with member advocacy and legal support to handle those bills when they show up, and it is communicated clearly before anyone needs care.
I will always lay out both sides. A traditional PPO costs more, but your people almost never hear the word "no" at the front desk. The cheapest plan on the spreadsheet is not worth it if your employees are getting collection letters.
Questions to ask
- Is this a direct contract or reference-based pricing, and with which providers?
- What happens, step by step, when an employee gets a balance bill?
- Who provides member advocacy, and what has their track record been?