Health care costs are a significant component of the high cost of living in the US, contributing nearly $12,900 per person in 2021.
How much you pay depends on how often and for what type of health care services you use them. A copayment or co-insurance may apply depending on each service provided to you.
In-network
Selecting providers within your insurance network – like physicians and clinics – is one way to cut health care costs. Many in-network doctors and facilities agree to offer services at discounted rates that have been negotiated between themselves and your insurer.
Reaching out to an in-network provider can save you money on copays, coinsurance and deductibles – the parts of your health plan that require out-of-pocket payments for covered services. For example, if your PPO plan has a $2,500 deductible and you visit an in-network doctor or clinic for an office visit, 70 percent of the costs associated with that service will be covered by the plan.
Your health plan likely has contracts with various doctors, hospitals, labs, radiology facilities and pharmacies that provide care for its members. In exchange for such high volumes of customers coming their way from your health plan, these facilities have agreed to offer discounted services at reduced rates.
Out-of-network
Most health insurance plans only pay a portion of the costs when receiving care from doctors and hospitals in their network, potentially leaving significant amounts unreimbursed – particularly for people with more expensive health needs or specific specialized requirements.
When seeking care from an out-of-network provider, the bill you may receive may exceed your deductible or copay amount; this practice is known as balance billing.
Make sure that you receive an easy-to-understand notice about the cost and options for out-of-network care, in order to help avoid balance bills.
Plan documents provide another useful way of understanding how much out-of-network care will be covered by insurance, often by providing UCR charges or Medicare fees as the basis for out-of-network amounts that your insurer allows. These amounts are calculated based on what providers typically charge in your region for similar procedures and may be adjusted based on geographic factors.
Reference-based pricing
Reference-based pricing (RBP) can help to control health care costs. By eliminating health insurance networks and giving employees more freedom of choice, this approach offers cost savings while giving employees greater choice of health services.
Reference-based pricing plans require employers to pay a set price per service they provide based on an established benchmark, such as Medicare’s reimbursement schedule.
Self-funded employers and their workforces alike can save money with this approach, while better controlling healthcare costs and mitigating balance billing risk.
RBP is an established method for repricing and paying members’ medical claims more economically – often cutting healthcare costs by 15-30%.
Reference-based pricing can be an excellent solution for self-funded plans as it enables them to capitalize on part of the claims savings generated. However, it requires significant modifications in organizational structure and may not be suitable for every employer.
