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Health Plans: What is Reference Pricing?

Health care caps pit quality vs. cost

Source: TribLive

Author: The Associated Press

Health Plans: What is Reference Pricing?

Image courtesy of [phasinphoto] / FreeDigitalPhotos.net

The Obama administration has given the go-ahead for insurers and employers to implement a cost-control strategy that puts a hard dollar limit on how much health plans will pay for some expensive procedures, such as knee and hip replacements.

Some experts worry that such a move would surprise patients who choose to use more expensive hospitals. The cost difference would leave them with big medical bills that they’d have to pay themselves.

That could undercut key financial protections in President Obama’s health care law that apply not just to the health insurance exchanges, but to most job-based coverage as well.

Others say it’s a valuable tool to reduce costs and help keep premiums in check.

There is concern among some federal regulators. A recent administration policy ruling went to unusual lengths, acknowledging that the cost-control strategy “may be a subterfuge” for “otherwise prohibited limitations on coverage.”

Nonetheless, the departments of Labor and Health and Human Services said the practice — known as reference pricing — could continue. Plans must use a “reasonable method” to ensure “adequate access to quality providers.” Regulators asked for public comment, saying they may publish more guidance.

HHS spokeswoman Erin Shields Britt said in a statement that the administration is monitoring the effects of reference pricing on access to quality services and will work to ensure that financial protections for consumers are not undermined.

One way the new approach is different is that it sets a dollar limit on how much the health plan will pay for a given procedure. Most insurance pays a percentage of costs, and those costs can vary from hospital to hospital. The insurance pays the same percentage whether a patient’s choice of hospital charges more or less for the procedure.

Some experts are concerned.

“The problem … from the patient’s perspective is that at the end of the day, that is who gets left holding the bag,” said Karen Pollitz of the nonpartisan Kaiser Family Foundation, formerly a top consumer protection regulator in the Obama administration.