Under the Medicare Modernization Act, Indian Tribal Entities have been able to take advantage of Medicare Like Rate (MLR) pricing for all hospital and hospital owned entities. Health West has been accurately pricing Medicare Like Rates for Indian Tribal Entities for over 10 years.
The PPO allowed amount sounds like a good deal until you compare it to the Medicare allowed amount. Medicare often reimburses at the hospital’s cost which leaves no margin for the facility and providers. Reference based pricing addresses this issue by adding on to the Medicare reimbursement amount to account for a small profit margin for the providers.
If you use this strategy to price your out-of-network claims at Medicare plus 30% your potential plan savings could be:
According to Aon Hewitt's 2014 Health Care Survey of more than 1,230 employers, An April 2014 analysis of health claims data by the Employee Benefit Research Institute (EBRI) found that if employers had adopted reference pricing for the six health care services EBRI analyzed, it would have reduced their overall health care spending by 1.6 percent that year. Savings from reference pricing materializes through the combination of 1) patients choosing providers at the reference price, 2) patients paying the difference between the reference price and the allowed charge through cost sharing, and 3) providers reducing their prices to the reference price.
According to a report by the nonprofit Robert Wood Johnson Foundation, Exploring the Use of Reference Pricing by Insurers and Employers, the Obama administration recently indicated that the use of reference pricing by large group and self-funded group plans does not violate the Affordable Care Act’s cap on patients’ annual out-of-pocket costs. Some experts say this guidance is likely to encourage additional employers to adopt reference pricing strategies.
30% = $41,735
50% = $29,811
Savings = $140,414