10 Facts about Reference-Based Pricing

December 22, 2021

First Stop Health

Reference-Based Pricing is when a self-funded employer does not use a traditional health insurance network. Instead, the employer pays hospital facility fees as a percentage of Medicare.   

Here are the top 10 facts about Reference-Based Pricing: 

  1. Employers that use Reference-Based Pricing will pay a hospital 120% to 200% of Medicare Reimbursement.  
  2. This reimbursement amount is still FAR LESS than the traditional commercial insurance discount amount, which is often 500% or more of Medicare reimbursement.  
  3. Doctor and other professional fees are typically still paid through a network, as these fees are far less than the hospital facility fees.  
  4. Reference-Based Pricing must use a Third-Party Administrator (TPA) to process the claims and make the correct payments.  
  5. Employers that have enacted Reference-Based Pricing have seen their total employee health plan costs decrease by 30% or more. 
  6. It is estimated that 2-3% of employers are already using Refence-Based Pricing.1 
  7. An employer survey found that 7-11% of employers were considering a Reference-Based Pricing plan in the future.1 
  8. Reference-Based Pricing saved the state of Montana $15 Million per year for their State Employee Health Plan.2 
  9. A major risk of Reference-Based Pricing is balance-billing of plan members by a hospital system. 
  10. Many Reference-Based Pricing plans use a navigation or advocacy service in conjunction with legal services to protect plan members from hospital system balance-billing. 


  1.  https://us.milliman.com/-/media/milliman/pdfs/2021-articles/2-1-21-understanding_the_evolution_of_reference-based-v1.ashx 
  2.  https://www.propublica.org/article/in-montana-a-tough-negotiator-proved-employers-do-not-have-to-pay-so-much-for-health-care 

Originally published Dec 22, 2021 2:00:00 PM.