Justin Donald Leader

When I think about the great state of Montana I cant help but think of the book and subsequent movie “A River Runs Through It”, written by Norman Maclean in 1976. One who thinks about the beautiful scenery as well as this story cannot help but feel a sense of nostalgia when it comes to those three rivers in Missoula.

The one thing I did not expect coming out of Montana was the fact that the state would grab the “bull by the horns” in the battle against rising healthcare costs by embracing a Reference Based Pricing (RBP) model for the health plan of 33,000 state employees! Montana will save more than $25 million by the end of 2018 through changes to the state of Montana’s health care plan, Governor Steve Bullock said.

“This change will save taxpayers and employees money, which means more money in the hands of hardworking Montanans being spent on Main Streets all across the state,” Bullock said. “As the largest state employer, it is critical that the state of Montana leads the way in managing rising health care costs and do so in a fiscally responsible way.”

Reference based pricing refers to a payment methodology used in the health industry if the plan is self-insured, whereby the insurer or employer sets a reference price (maximum amount) which it will pay for a single service or bundle of services. For example, a payer could use the Medicare rate to establish the base price then add a percentage amount to the base. Medicare establishes rates using several methodologies including

Reference-based pricing is intended to reduce or eliminate the wide variation in charges for medical care between providers. For example a Kaiser study on hospital charges found a wide variation in charges including things like Blood cholesterol tests ranging from $10 to $10,169 and items like a basic metabolic panel ranging from $35 to $7,303.

The lack of transparency in pricing of services and procedures has led to an absurd amount of wasted spend and is one of the major factors in the endless increase of healthcare costs year after year. While there is no quick fix to the US healthcare system, Governor Steve Bullock states “What the new reimbursement model does is make medical costs more predictable, consistent, and comparable among facilities,”

For employers across the nation we see the RBP trend “catching” on more and more with each cringe worthy annual renewal. While the naysayers will say this is a whopper of a fish tale, I find myself, just like the state of Montana sold on RBP, hook, line and sinker.

–Justin Leader is Vice President of Business Development with Benefit Design Specialists, Inc. BDS is committed to a two-fold goal; delivering quality, cost-effective employee benefit plans coupled with hassle-free benefits management for our client’s HR departments.  Transparent Health, By BDS is a solution that drives down Healthcare costs while giving complete investment transparency.

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