Reference-based pricing, without the sales pitch.
Reference-based pricing pays hospitals a set multiple of Medicare instead of a negotiated network discount. It can take real money out of a self-funded plan, and it can put one of your employees in the middle of a billing dispute. Both of those are true at the same time. We model whether it fits your group, and we will tell you when it does not.
What it actually is.
Strip away the branding and it is three changes to the way a claim gets paid.
The plan sets the price
Instead of accepting a network’s negotiated rate, the plan pays a defined multiple of what Medicare would pay for the same service. Published programs commonly sit near 140 percent of Medicare.
There is no network behind you
Most designs drop the hospital network entirely, or keep a network for physicians and apply the reference price to facility claims. No network contract also means no negotiated protection against being billed for the difference.
A repricer and an advocate sit behind every claim
An administrator reprices the bill and a member advocacy team handles the pushback. The quality of that advocacy team is the single biggest variable in whether your employees experience this as a cost strategy or as a problem.
Because the underlying number is real.
The gap between what Medicare pays and what a commercial plan pays for the same service is large, published, and getting more visible every year.
The spread is documented
RAND’s employer-led hospital price transparency study found private health plans paid hospitals 254 percent of what Medicare would have paid for the same services in 2022.
Published results are meaningful
A 2026 study in Health Affairs Scholar examined one national reference-based program covering roughly 300,000 lives. Inpatient claims paid 122 percent of Medicare against 240 percent for other commercial payers; outpatient paid 149 percent against 311 percent.
What that study does not claim
The authors are explicit that the analysis is descriptive rather than causal, that it is a single-year snapshot, and that it does not account for the cost of administering the program. Anyone quoting the savings number without that sentence is selling, not advising.
What the pitch leaves out.
None of these are reasons to rule it out. They are the reasons these plans fail when nobody has planned for them.
A balance bill lands on your employee
When a hospital bills more than the plan pays, the difference is billed to the member. Someone has to make that stop, and the employee’s first call is to your HR team.
Providers can decline to schedule
A hospital with no contract has no obligation to take your people for non-emergency care. In a market with one dominant system, that is not a theoretical risk.
The No Surprises Act was not written for this
Its protections were built around emergency care and out-of-network providers at in-network facilities. Planned care under a plan with no network is not the situation it was designed to solve.
Legal defense is a line item
These programs budget for defending balance bills and appeals. Ask what is included, what is excluded, and who decides when a disputed bill gets settled.
Stop-loss reprices the change
Your stop-loss carrier will have a view on a plan with no network, and it shows up in the rate and the attachment point. Price the whole change, not only the claims line.
HR absorbs the friction
Every disputed bill is a phone call. The question is never whether they happen. It is whose desk they land on.
When it is worth a serious look.
The answer is rarely about the employer’s size. It is about claims data, geography and appetite.
Worth modeling
You are already self-funded and have credible claims history. Your market has a wide spread between systems rather than one that sets the price. Your people are spread across several facilities. Leadership will hold the line through the first disputed bill. And HR has the capacity to absorb the calls, or a broker who absorbs them instead.
Probably not yet
One health system dominates the market your people already use. You are in the first year of self-funding and still learning your own claims. A meaningful share of the population is mid-treatment on specialty or chronic care. HR is a team of one. Or this is the same year you are changing carriers, payroll or your benefits administration platform.
Things worth pricing before you price this.
Reference-based pricing is one lever. It is rarely the first one, and several of these carry far less disruption for a similar result.
A tiered or narrower network
Steering toward the efficient systems you already contract with, without giving up the contract itself.
Direct contracting and centers of excellence
A negotiated rate with named facilities for the procedures that actually drive your spend.
Pharmacy, on its own
Specialty drug spend is where mid-market plans are losing ground fastest, and it moves without touching how anyone sees their doctor.
Payment integrity and claims auditing
Paying the correct amount under the contract you already have. Unglamorous, and it turns up money most years.
Level funding, if you are still fully insured
Self-funded up to the attachment point with stop-loss above it. It is the step that gives you your own claims data, which is what every decision after this one depends on.
How we would look at it with you.
For proper coverage of an account we work in service teams of five, so the modeling, the compliance read and the day-to-day service are not the same person’s spare afternoon.
We model it against your claims, not a sample
Published averages tell you the strategy works somewhere. Your own claims tell you whether it works here.
We map your people against the hospitals they use
Utilization by facility, not by ZIP code. A savings projection that ignores where your employees actually go is arithmetic, not advice.
We read the vendor contract and the stop-loss together
Legal defense, appeal handling, settlement authority and the attachment point are one decision, not four.
We are willing to tell you no
We are not paid to place a particular arrangement. When the modeling says the savings will not survive the disruption, that is the recommendation.
What this is, and what it is not.
General information, summarized from published research and public guidance, written to help you ask better questions of whoever is pitching you.
The figures cited here
RAND Hospital Price Transparency Study, Round 5.1, published December 2024 on 2022 claims. Reference-based program results from Health Affairs Scholar, July 2026. Both are public and both are worth reading before a decision this size.
What we are
CFH Insurance Consultants are licensed insurance brokers. We are not attorneys, and nothing here is legal advice or a recommendation for a specific arrangement. CPAs and ERISA attorneys are available to clients through the firm.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
Bloomfield Hills, MI 48304
248.370.8853
719.425.2649
281.404.5670
Cookies on this site
We use cookies to keep the site working properly and to understand how it is used. You can decline anything that is not essential. See our Privacy Policy for the detail.
- Essential — needed for the site to load and for you to move around it. These cannot be switched off.
- Analytics — tell us which pages get read, so we know what is worth writing more of.
- Advertising — set by third parties such as ad and social platforms to measure and target campaigns.