For years, employers have struggled to balance rising healthcare costs with the need to offer competitive, high-quality benefits. Traditional PPO plans, once the go-to option, have become increasingly expensive and opaque—leaving HR and benefits leaders with little control and even less clarity.
But a growing number of organizations are turning to a smarter, more transparent alternative: Reference-Based Pricing (RBP). And the results? Double-digit savings, more plan flexibility, and better protection for both employers and employees.
The PPO Problem: Rising Costs, Shrinking Value
Employer healthcare costs are projected to rise again by 6.5% in 2026, following years of annual increases that outpace wage growth and inflation. PPO plans often reimburse providers based on billed charges—costs that can vary wildly and are rarely disclosed upfront. (Source: Mercer National Survey of Employer-Sponsored Health Plans, 2024). Meanwhile, many employees find themselves navigating narrow networks, high deductibles, and confusing bills—leaving both sides dissatisfied.
The RBP Solution: Cost Control with Clarity
Reference-Based Pricing flips the model by tying reimbursements to a transparent benchmark—typically a percentage above Medicare rates—rather than unpredictable hospital charges.
Here’s how RBP saves money:
- Transparent Pricing: RBP bases payment on fixed, known rates (e.g., 140% of Medicare), not arbitrary charges.
- Open Access: Most RBP plans are non-network, giving employees freedom to choose any provider.
- Plan Customization: Employers have more control over plan design and utilization strategies.
- Billing Support: Employee advocacy services help resolve balance billing and provider negotiations.
According to a 2023 report by The Health Care Cost Institute, commercial insurers pay, on average, 240% of Medicare rates for hospital services—which means RBP plans (often paying 130–160%) represent a significant discount. (Source: HCCI, Prices Paid to Hospitals by Private Health Plans, 2023)
Real Results: Employers Are Seeing 20–40% Savings
Studies and case examples consistently show that employers implementing RBP see:
- 20–40% annual savings on total healthcare spend
- Immediate reductions in hospital and facility costs
- Improved plan sustainability without cost-shifting to employees
A 2024 analysis by the National Alliance of Healthcare Purchaser Coalitions found that mid-sized employers using RBP saved $2,000–$3,500 per employee per year compared to traditional PPOs—without reducing access or coverage.
Is RBP Right for You?
RBP may not be the right fit for every group, but it’s a compelling solution for:
- Self-funded employers looking for long-term savings
- Groups frustrated by opaque PPO billing and limited negotiation power
- Organizations ready to invest in employee education and advocacy support
With the right partners and communication strategy, RBP can reduce costs while increasing value and choice—a rare win-win in today’s benefits landscape. Reach out to us today and we can connect you with the right partners along with provide support for your implementation to help take the heavy lift off your benefits team. Start saving and reinvesting today!
Final Thought
In an environment where healthcare costs are unpredictable and unsustainable, Reference-Based Pricing offers a path forward: transparent, fair, and financially responsible. For HR and benefits leaders looking to reclaim control without compromising care, RBP isn’t just a trend—it’s a strategic advantage. Schedule a free 30-minute discovery call today before you make your final benefit plans for 2026- hear about some new options!
Sources:
- Mercer National Survey of Employer-Sponsored Health Plans (2024)
- Health Care Cost Institute (HCCI), Prices Paid to Hospitals by Private Health Plans, 2023
- National Alliance of Healthcare Purchaser Coalitions, Reference-Based Pricing Performance Report, 2024