Reference-Based Pricing Model Results in 60+% Savings for TPA Clients

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A third party administrator (TPA) serving the U.S., Cypress Benefit Administrators reports that some of its employer-clients are now saving more than 60% on health claims by using a referenced-based pricing (RBP) model. The TPA explains how RBP offers fair pricing by medical procedure, along with added pricing transparency.

Cypress Benefit Administrators
Nobody wants to be surprised with a high-cost health claim that is thousands of dollars beyond a total that seems justifiable for the services provided.

With more of its employer-clients adopting a referenced-based pricing (RBP) model, Cypress Benefit Administrators reports that many are now realizing savings of over 60% on billed medical claim charges.

The third party administrator (TPA) began studying the evolving concept of RBP as the effectiveness of PPO discounts came into question with health plans of all sizes over the last several years. As Tom Doney, president and CEO of Cypress, explained, “The problem was that we’d be promised a discount of 35-40% from a contracting PPO, but then find the rates negotiated weren’t billed consistently or were still considerably higher than those others were being charged.”

Based on this continuing trend, Doney and his team at Cypress considered the RBP model as a way to determine fair prices for the medical services received and give employer-clients and their plan participants more cost transparency in the process. “Nobody wants to be surprised with a high-cost health claim that is thousands of dollars beyond a total that seems justifiable for the services provided,” he said. “RBP represents a collective approach to this concern where people across multiple industries are working together to determine a reasonable price by procedure.”

In evaluating the RBP results to date, some of Cypress’s employer-clients are saving 60% or more off of billed health claim costs, and in a few cases, the savings are averaging out to over 70%. In addition to these lower claim costs, plans can also benefit from reduced stop loss insurance premiums and vendor fees.

“With RBP, we are consistently finding claim charges to be significantly less than what many plans were billed before with a PPO discount applied,” Doney said. “The individual claim savings are often quite substantial on their own, so imagine what that dollar amount adds up to when you look at all claims from one group over the course of a year.”

Doney explained that two of the main factors used to determine fair prices with RBP are the Medicare allowable rates published by the Center for Medicare and Medicaid Services (CMS) and the geographic region where medical services are performed. These are the core elements analyzed in establishing benchmarks for reimbursement amounts.

When companies move to the RBP model, Doney shared that it is important for them to modify their plan language to reflect this change. He also said that all parties – the plan, its members and providers – should receive customized communications about the RBP program in place.

About Cypress Benefit Administrators
A privately held company headquartered in Appleton, Wis., Cypress Benefit Administrators has been pioneering the way toward cost containment in self-funded health benefits since 2000. The third party administrator (TPA) is the country’s first to bring claims administration, consumer driven health plans and proven cost control measures together into one package for companies ranging from 50 employees to thousands of employees. It serves employer-clients across the U.S. with additional locations in Portland and Salem, Ore., Omaha, Neb. and Denver, Col. For more information on Cypress and its customized employee benefits, visit http://www.cypressbenefit.com.

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Dave Willems
Willems Marketing & Events
+1 920.750.5013
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Tom Doney
Cypress Benefit Administrators
920.968.4613
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