Determining if RBP Is Right for You

In our previous article, we discussed reference-based pricing and its cost saving potential. If you haven’t read that yet, read it here.

In this article, we are going to discuss the pros and cons of RBP and answer some key questions to help you determine if RBP is the right fit for you and your business.

Pros to RBP

1. Lower Health Care Costs

Lowering health care spending is the primary reason why self-funded employers adopt RBP. An employer’s actual savings will depend on a variety of factors, including:

  • The way in which RBP is incorporated into the plan. For example, does it apply to all “shoppable” covered services, only out-of-network providers or only certain high-cost procedures/providers?
  • The plan’s reference-based price for paying claims (for example, 140% of Medicare). Is it lower than what most providers in the area charge for their services?
  • The number of quality providers in the area who accept the plan’s reference-based price (or is the employer—through its RBP vendor—regularly negotiating higher payment amounts with providers)
2. More Control Over Health Care Spending

With RBP, self-funded employers can regain some control over their health care spending because payments are linked to the plan’s reference-based price and not a provider’s usual charge. In addition, by using RBP, self-funded employers may be better able to budget for their future healthcare spending, because they can anticipate how much they will pay for the claims subject to RBP.

3. Benefits for Employees

Although the primary reason employers adopt RBP is to lower their own health care spending, employees may also benefit from this payment strategy. Employers who reduce their health care costs with RBP may share some of the savings with their employees by reducing employees’ premiums, lowering cost sharing (such as deductibles) or making improvements to other employee benefits.

Additionally, employers who are controlling health plan costs from year-to-year may no longer need to shift costs to their employees by increasing premiums or deductibles. In a tight labor market, access to lower-cost health plan coverage can give employees a reason to join or stay with an employer.


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Cons to RBP

1. Balance Billing

The main drawback to RBP is the increased risk for balance billing. Balance billing occurs if a provider refuses to accept the plan’s reference-based price as payment in full. To collect the unpaid amount, the provider often sends a bill to the employee for the difference between the plan’s payment and the provider’s billed charge.

Receiving an unexpected or surprise medical bill is upsetting and stressful for employees. If balance billing occurs regularly, it will create tension in the workplace and likely have a negative effect on overall employee satisfaction and retention.

To reduce the likelihood of balance billing and minimize its impact on employees, employers implementing RBP should consider the following steps:

  • Select an RBP vendor that has experience with addressing balance billing issues and successfully negotiating disputes with providers. Some RBP vendors even negotiate the plan’s reference-based price with providers in advance of employees receiving care.
  • Encourage employees to use lower-priced providers (or providers who have been identified as willing to accept the plan’s reference-based price as payment in full).
  • Inform employees, as part of the RBP rollout, about the possibility of balance billing and instruct them on what steps to take if they receive this type of bill—for example, promptly contact the RBP vendor so it can help them resolve the issue.
2. Access to Quality Health Care

Depending on where employees live, they may not have access to a sufficient number of high-quality providers who will accept the plan’s reference-based price as full payment. Using RBP in this type of setting will have a negative impact on employee relations, as employees may have to choose between a lower-quality provider and receiving a balance bill from a provider who provides better care. An employer’s cost savings will be reduced if the RBP vendor has to regularly negotiate higher payments with providers in order to avoid balance bills.

3. Complexity

Because RBP is not a traditional payment strategy for health plans, employers may be unfamiliar with it.  Each RBP vendor will have its own implementation strategy and contract terms, including its established benchmark for paying providers and ways to address balance billing. Many of these concepts and contract terms may be unfamiliar to most employers. Employers who are interested in RBP should work with their advisors to review these arrangements carefully before signing the contract or communicating the terms to employees.

Key Questions

Employers with self-funded plans may be interested in RBP as a way to control their health plan spending. RBP is not for all employers, but it may be especially useful for employers with rapidly rising healthcare costs that have not responded to other cost containment strategies.

Keep in mind that employers often use RBP only for certain high-cost procedures or providers (or for out-of-network services) and use traditional provider networks for all other health care claims.

When considering if RBP is right for your business, ask the following key questions:

  1. What is the age makeup of your organization?
    Whether RBP will lower healthcare expenses for an employer depends, in large part, on how its employees use their health care benefits. Companies with young and healthy employees may not see significant cost savings with RBP because there will be fewer large claims to generate those savings. However, companies with employees who are older or who tend to have major medical procedures (for example, joint replacements), may be able to considerably lower their health plan spending by adopting RBP.
  2. Do your employees live in an area where providers’ charges vary widely for similar services and tend to be more than the plan’s reference-based price?
    There is wide variation in the amount healthcare providers charge for the same service throughout the United States and even within the same geographic area. Employers with employees who live in areas where health care costs are generally high and where there is significant price variation for the same services are more likely to save money with RBP.
  3. Do your employees live in an area with an adequate number of quality providers who will accept RBP as full payment?
    In general, RBP is not appropriate for employees who live in communities without enough high-quality providers who accept the reference-based price as full payment. A main component of RBP is encouraging employees to choose (or shop for) lower-priced providers to save on costs and avoid balance bills while also receiving high-quality health care. When this is not possible, RBP does not make sense.
  4. How will your employees react to RBP, including the possibility of balance billing?
    RBP is fundamentally different than the traditional payment strategy that is familiar to most employees. Some employee groups may view the switch to RBP more negatively than others, especially because it puts the onus on them to find providers who will accept the plan’s reference-based price and increases the risk for balance billing. A key component of a successful RBP program is a strong education and support program for employees. It is critical that employers invest the time and resources to educate employees about how RBP works, help employees locate lower-priced providers and provide support to help resolve balance billing issues. An experienced RBP vendor should be able to help employers through this process.


Employers with self-funded health plans should consider these factors to determine if RBP is the right fit for them.

  • The cost of health care where employees are based
  • The availability of an adequate number of quality health care providers who will accept the plan’s reference-based price as full payment
  • The impact of the switch to RBP on employee relations, including the tension created by the increased risk for balance billing

Employers who are interested in moving forward with an RBP plan should work with an experienced agency that can guide them through the implementation process, including determining the reference-based price and the type of RBP design.

The most important factor in ensuring that a company makes the best choice is to have an experienced professional aid in the decision-making process. RMC Group is ready to help your business assess its current plan and make recommendations for improvement. Contact us today to schedule a free review with one of our Health Professionals at 239-298-8210 or [email protected].