The Time is Now for Reference-Based Pricing Plans

As if the standard issues facing businesses related to healthcare were not enough, businesses now have to deal with the COVID-19 pandemic. As it was, annual premiums were on the rise – increasing 5% in 2019 and predicted to increase 6% in 2020.[1] The health care costs related to COVID-19 are immense. Kaiser Family Foundation estimates that the cost of treating a COVID-19 patient is more than $20,000.[2] In April, Health Affairs provided direct medical cost estimates to be $654 billion over the course of the pandemic if 80% of the U.S. population gets infected and $163.4 billion if 20% of the U.S. population gets infected. Add to that a glut of delayed elective surgeries and other medical procedures and costs are likely to skyrocket.[3]

We hear every day how COVID-19 is impacting businesses. According to Business Insider, more than 99% of businesses are small businesses. Those small businesses employ about 50% of all workers.[4] COVID-19 is seriously impacting them. The hospitality and travel industries have faced the biggest impact. While it is predicted that manufacturing and construction may soon “suffer the strain as consumer demand drops.”[5]

Through the COVID-19 crisis, one thing has become crystal clear – small businesses are “financially fragile.”[6] “The median firm with monthly expenses over $10,000 had only enough cash on hand to last roughly 2 wk. Three-quarters of respondents only had enough cash on hand to last 2 mo or less.” Id.

Where can these and other businesses look to save? Cutting health care costs is one of the first places a business can and should look. An immediate way to cut expenses and provide some financial relief is by implementing an employer-sponsored self-funded reference-based pricing health plan. It may sound complicated, but it actually brings predictability to businesses and employees and accountability to health care providers.

A reference-based pricing plan needs to be properly implemented to meet the goals of the business and satisfy the health care needs of its employees. One of the keys to success is effective plan participant advocacy.  The majority of providers accept reference-based pricing payments and fewer than 10% of claims lead to a balance bill.[7] But that 10% of cases generates the most noise. With proper advocacy, this noise can be significantly reduced, if not completely eliminated.

Successful advocacy requires employee education, correct paper writing services and outreach. Because the reference-based pricing concept will likely be new to the employees, education on how the health plan works and the employees’ obligations under the plan is critical. Participants may need assistance understanding their coverage, reading an EOB and determining whether a medical bill is a balance bill.

Successful advocacy also requires balance bill defense, including legal defense. The plan participants need an advocate to fight the collection attempts from providers and collection agencies. The plan participants need a lawyer to defend them should a lawsuit be filed (a rare occurrence), protect them from improper collection tactics, and enforce their legal rights under consumer laws.

A good advocate will build a relationship with both the business and the employee. Everyone benefits.

COVID-19 is creating a significant opportunity for reference-based pricing to grow. Businesses will see immediate and long-term savings. With effective advocacy, most employees will become more engaged with their plan and more invested in the health care system. aequum looks forward to being part of the growth and opportunity.

[1] Kaiser Family Foundation, Employer Health Benefits 2019 Annual Survey (

[2] Potential Costs of Coronavirus Treatment for People with Employer Coverage, M. Rae, et al, Mar. 16, 2020 (

[3] The Potential Health Care Costs and Resource Use Associated with COVID-19 in the United States, Health Affairs, Vol. 39, No. 6 (

[4] How does coronavirus impact small businesses?

[5] Which industries are most impacted by coronavirus?

[6] The impact of COVID-19 on small business outcomes and expectations, A. Bartik, et al, PNAS (July 28, 2020) (