More Plans Capping Spending on Some Services
Written by Editor   
Monday, October 27, 2014 03:50 PM

Aiming to contain healthcare costs, a growing number of employers and insurers are adopting a strategy that limits how much they'll pay for certain medical services.  A recent study found that savings from such moves may be modest, however, and some experts question whether "reference pricing," as it's called, is good for consumers.  

For example an insurer may set $30,000 as the reference price for those a surgery in its preferred provider organization plan. Members who get surgery at one of the hospitals that charge $30,000 or less pay only their plan's regular cost-sharing. If a member chooses to use an in-network hospital that charges more than the reference price, however, they're on the hook for the entire amount over $30,000, and the extra spending doesn't count toward their annual maximum out-of-pocket limit.

Experts say that reference pricing is most appropriate for common, nonemergency procedures or tests that vary widely in price but are generally comparable in quality. Research has generally shown that higher prices for medical services don't equate with higher quality. Setting a reference price steers consumers to high-quality doctors, hospitals, labs, and imaging centers that perform well for the price, proponents say.

Others point out that reference pricing doesn't necessarily save employers a lot of money, however. A study released earlier this month by the National Institute for Health Care Reform examined the 2011 claims data for 528,000 autoworkers and their dependents, both active and retired. It analyzed roughly 350 high-volume and/or high-priced inpatient and ambulatory medical services that reference pricing might reasonably be applied to. The overall potential savings was only 5%, the study found.

Even though the results may be modest, a growing number of very large companies are incorporating reference pricing.  This spring, the Obama administration said that large group and self-insured health plans could use reference pricing.

The health law sets limits on how much consumers have to pay out of pocket annually for in-network care before insurance picks up the whole tab -- in 2015, it's $6,600 for an individual and $13,200 for a family plan. But if consumers choose providers whose prices are higher than a plan's reference price, those amounts don't count toward the out-of-pocket maximum, the administration guidance said.

Leaving consumers on the hook for amounts over the reference price needlessly drags them into the battle between providers and health plans over prices.  "You expect the health plan to do a few things: negotiate reasonable prices with providers, and not to enter into network contracts with providers who provide bad quality care. Reference pricing is kind of an admission that health plans have failed on one or both of those fronts."

Source:  http://www.medpagetoday.com/PracticeManagement/Reimbursement/48177