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Reference Pricing: Will Price Caps Help Contain Healthcare Costs?

Monday, November 18, 2013

Many employers have begun to adopt a strategy known as "reference pricing" to help reduce health care costs. Under this benefit design, employees get insurance plans that set price caps on certain services and procedures. Enrollees are allowed to use any provider. But if they use providers with fees higher than the "reference price," they must pay the difference between the reference price limit, determined by the employer or insurer, and the actual charge.

Reference pricing can help raise awareness among patients about price differences across service providers, and exert competitive pressure on high-cost providers to bring down their prices. But questions remain about this benefit design and the problems it aims to solve. Evidence has shown that reference pricing can lower costs and increase value in prescription drug plans, but what about medical and surgical services? Are there certain procedures in which reference pricing is likely to be more effective? What are the challenges to employers, insurers, and providers? What concerns might employees have under this design? Are there lessons for public coverage plans in this experience?

A distinguished panel of experts addressed these and related questions.

Andréa Caballero, program director at Catalyst for Payment Reform, provided an overview of reference pricing, how it works and what some of the challenges are.

Theresa Monti, vice president at Total Rewards at Kroger, discussed Kroger's experience with implementing reference pricing.

David Cowling, chief of the Center for Innovation at California Public Employees' Retirement System, discussed CalPERS' reference pricing program and its projected savings.

Michael Belman, medical director at California WellPoint, discussed the role of insurers in reference pricing and their various partnerships with employers.

Ed Howard of the Alliance moderated the discussion.

Follow the briefing on Twitter: #ReferencePricing

Contact: Marilyn Serafini (202) 789-2300

The event was sponsored by the nonpartisan Alliance for Health Reform and WellPoint.

Transcript, Event Summary and/or Webcast and Podcast

Transcript: Full Transcript (Adobe Acrobat PDF), 11/18/2013
Full Webcast/Podcast: Full Video from C-SPAN

Speaker Presentations

Belman Presentation (Adobe Acrobat PDF), 11/18/2013
Caballero Presentation (Adobe Acrobat PDF), 11/18/2013
Cowling Presentation (Adobe Acrobat PDF), 11/18/2013
Monti Presentation (Adobe Acrobat PDF), 11/18/2013

(If you want to download one or more slides from these presentations, contact us at info@allhealth or click here for instructions.)

Source Materials

Agenda (Adobe Acrobat PDF), , 11/18/2013
Materials List (Adobe Acrobat PDF), , 11/18/2013
Source List (Adobe Acrobat PDF), , 11/18/2013
Speaker Biographies (Adobe Acrobat PDF), , 11/18/2013

Offsite Materials (briefing documents saved on other websites)

Employers Test Plans That Cap Health Costs, The New York Times, 6/23/2013
Reference Pricing and Bundled Payments. A Match to Change Markets. (Adobe Acrobat PDF),Catalyst for Payment Reform; Health Care Incentives Improvement Institute, 10/1/2013
From Reference Pricing To Value Pricing (Adobe Acrobat PDF),Catalyst for Payment Reform, 1/1/2013
Stunning Results from California, National Center for Policy Analysis, 8/7/2013
Quality Matters. Health Care Price Transparency: Can It Promote High-Value Care?, The Commonwealth Fund, 4/1/2012
Closing the Gap: Reducing Price Variance in Health Care with Reference-Based Pricing, Castlight Health, 7/1/2012
Bending the Cost Curve with Reference Pricing, The Health Care Blog, 7/27/2013
Hospital Ratings are in the Eye of the Beholder, Kaiser Health News, 3/18/2013
Reference Pricing: Stimulating Cost-Conscious Purchasing and Countering Provider Market Power (Adobe Acrobat PDF),National Institute for Health Care Management, 10/1/2013
The Sleeper in Health care Payment Reform, The New York Times, 8/2/2013
Towers Watson/NBGH Employer Survey on Purchasing Value in Health Care, Towers Watson, 3/7/2013
High and Varying Prices for Privately Insured Patients Underscore Hospital Market Power, Center for Studying Health System Change, 9/1/2013
Hospital Quality Reporting: Separating the Signal from the Noise, National Institute for Health Care Reform, 4/1/2013
Ensuring Competitive Markets for Health Care Services (Adobe Acrobat PDF),Catalyst for Payment Reform, 1/1/2013
Wide Variation in Hospital and Physician Payment Rates Evidence of Provider Market Power, Center for Studying Health System Change, 11/1/2010
A Systematic Review of Reference Pricing: Implications for US Prescription Drug Spending, American Journal of Managed Care, 11/1/2012
Price Transparency (Adobe Acrobat PDF),Catalyst for Payment Reform, 1/1/2013
Payers Test Reference Pricing And Centers Of Excellence To Steer Patients To Low-Price And High Quality Providers, Health Affairs, 9/1/2012
Increases in Consumer Cost Sharing Redirect Patient Volumes and Reduce Hospital Prices For Orthopedic Surgery, Health Affairs, 8/1/2013


Reference Pricing shines a spotlight on unwarranted cost variation, Andréa Caballero, program director at Catalyst for Payment Reform, stated at a November 18 Alliance briefing: Reference Pricing: Will Price Caps Help Contain Healthcare Costs?

Reference pricing saves money for patients on their co-payments and for insurers, which then impacts premiums they charge, Michael Belman, medical director at California WellPoint, stated at a November 18 Alliance Briefing, Reference Pricing: Will Price Caps Help Contain Healthcare Costs?


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