The Evolution of Reference Based Pricing

The Evolution of Reference Based Pricing

The use of reference-based pricing (RBP) to pay for the health care services has been growing over the last decade. This article discusses how RBP approaches have changed and improved over time, helping plan sponsors negotiate better prices for health care services.


The term reference-based pricing (RBP) came to the forefront when the California Public Employees Retirement System (CalPERS) Health Plan, the nation’s second-largest plan, launched a new program called referenced-based benefits (RBB) in 2011.

The CalPERS program set limits on how much the plan would pay health care facilities for three procedures – uncomplicated total hip and knee replacements ($30,000 limit), cataract surgery ($2,000 limit) and colonoscopies ($1,500 limit) – regardless of whether they were in the preferred provider organization (PPO) network of the CalPERS health insurance carrier. In the case of hip and knee replacements, if the participant chose a hospital that accepted plan payment, the participant had no additional out-of-pocket costs other than the standard deductibles and coinsurance amounts. However, if the participant went to a hospital that charged $50,000 and didn’t accept the plan payment as payment in full, the participant owed the hospital $20,000 in addition to the normal out-of-pocket costs. Approximately 30 hospitals initially accepted $30,000 as payment in full.

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via IBEBP

by Ken Berry and Ryan Day

Reproduced with permission from Benefits Magazine, Volume 56 Number 2, pages 20-26, February 2019, published by the International Foundation of Employee Benefit Plans (www.ifebp.org), Brookfield, Wisconsin. All rights reserved. Statements or opinions expressed in this article are those of the author and do not necessarily represent the views or positions of the International Foundation, its officers, directors or staff. No further transmission or electronic distribution of this material is permitted.Reproduced with permission from Benefits Magazine, Volume 56 Number 2, pages 20-26, February 2019, published by the International Foundation of Employee Benefit Plans (www.ifebp.org), Brookfield, Wisconsin. All rights reserved. Statements or opinions expressed in this article are those of the author and do not necessarily represent the views or positions of the International Foundation, its officers, directors or staff. No further transmission or electronic distribution of this material is permitted.