Reference Pricing: Will Price Caps Help Contain Healthcare Costs?

November 18, 2013

Many employers have begun to adopt a strategy known as “reference pricing” to help reduce health care costs. Under this benefit design, employees get insurance plans that set price caps on certain services and procedures. Enrollees are allowed to use any provider. But if they use providers with fees higher than the “reference price,” they must pay the difference between the reference price limit, determined by the employer or insurer, and the actual charge.

Reference pricing can help raise awareness among patients about price differences across service providers, and exert competitive pressure on high-cost providers to bring down their prices. But questions remain about this benefit design and the problems it aims to solve. Evidence has shown that reference pricing can lower costs and increase value in prescription drug plans, but what about medical and surgical services? Are there certain procedures in which reference pricing is likely to be more effective? What are the challenges to employers, insurers, and providers? What concerns might employees have under this design? Are there lessons for public coverage plans in this experience?

A distinguished panel of experts addressed these and related questions.

Andréa Caballero, program director at Catalyst for Payment Reform, provided an overview of reference pricing, how it works and what some of the challenges are.

Theresa Monti, vice president at Total Rewards at Kroger, discussed Kroger’s experience with implementing reference pricing.

David Cowling, chief of the Center for Innovation at California Public Employees’ Retirement System, discussed CalPERS’ reference pricing program and its projected savings.

Michael Belman, medical director at California WellPoint, discussed the role of insurers in reference pricing and their various partnerships with employers.

Ed Howard of the Alliance moderated the discussion.
Follow the briefing on Twitter: #ReferencePricing

Contact: Marilyn Serafini (202) 789-2300

The event was sponsored by the nonpartisan Alliance for Health Reform and WellPoint.


Full Transcript (Adobe Acrobat PDF)

Speaker Presentations

Michael Belman Presentation (Adobe Acrobat PDF)
Andréa Caballero Presentation (Adobe Acrobat PDF)
David Cowling Presentation (Adobe Acrobat PDF)
Theresa Monti Presentation (Adobe Acrobat PDF)

Event Details

Agenda (Adobe Acrobat PDF)
Speaker Biographies (Adobe Acrobat PDF)

Event Resources