Health insurers negotiate payments to providers using Medicare as the ‘reference’ or benchmark.
A Rand study concluded in 2017 that private health plans paid hospitals in Wisconsin on average 279% of Medicare. That study is here and if you’re patient, you may find one Milwaukee hospital that receives 444%!!
Payments obviously vary widely and are disproportionately out of whack in SE Wisconsin.
Enter self-funded plans using a ‘Referenced Based Pricing’ (RBP) model.
These plans simply set what the employer deems to be a ‘fair’ reimbursement, anywhere from 130-300% of Medicare rates (250% seems to the norm in most markets). If reimbursements are uniform, there’s no need to steer employees to preferred providers, so these plans have NO networks.
Seems like a reasonable approach. What could go wrong?
Consider Medicare pays about $100,000 for a kidney transplant and related expenses. It could cost as much as $444,000 locally. An RBP Plan would cover $250K. And who pays the $194,000 balance?
The RBP Plan Administrator says they’re “almost always able to negotiate a settlement.”
Small comfort to the employer who assumes a fiduciary responsibility in setting up the plan.
And, to the employee who signed a ‘Patient Responsibility Form’ at admission.
