---
title: 10 Facts about Reference-Based Pricing
description: What is Reference-Based Pricing? Reference-Based Pricing is when a self-funded employer does not use a traditional health insurance network. Instead, the employer pays hospital facility fees as a percentage of Medicare.   
---

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# [10 Facts about Reference-Based Pricing](https://blog.firststophealth.com/business-blog/10-facts-about-reference-based-pricing)

 Written by [First Stop Health](https://blog.firststophealth.com/business-blog/author/first-stop-health) | Dec 22, 2021 2:00:00 PM

Reference-Based Pricing is when a self-funded employer does not use a traditional health insurance network. Instead, the employer pays hospital facility fees as a percentage of Medicare.   

Here are the top 10 facts about Reference-Based Pricing: 

1. Employers that use Reference-Based Pricing will pay a hospital 120% to 200% of Medicare Reimbursement.  
2. This reimbursement amount is still FAR LESS than the traditional commercial insurance discount amount, which is often 500% or more of Medicare reimbursement.  
3. Doctor and other professional fees are typically still paid through a network, as these fees are far less than the hospital facility fees.  
4. Reference-Based Pricing must use a Third-Party Administrator (TPA) to process the claims and make the correct payments.  
5. Employers that have enacted Reference-Based Pricing have seen their total employee health plan costs decrease by 30% or more. 
6. It is estimated that 2-3% of employers are already using Refence-Based Pricing.1 
7. An employer survey found that 7-11% of employers were considering a Reference-Based Pricing plan in the future.1 
8. Reference-Based Pricing saved the state of Montana $15 Million per year for their State Employee Health Plan.2 
9. A major risk of Reference-Based Pricing is balance-billing of plan members by a hospital system. 
10. Many Reference-Based Pricing plans use a navigation or advocacy service in conjunction with legal services to protect plan members from hospital system balance-billing. 

 

1.  [https://us.milliman.com/-/media/milliman/pdfs/2021-articles/2-1-21-understanding_the_evolution_of_reference-based-v1.ashx](https://us.milliman.com/-/media/milliman/pdfs/2021-articles/2-1-21-understanding_the_evolution_of_reference-based-v1.ashx) 
2.  [https://www.propublica.org/article/in-montana-a-tough-negotiator-proved-employers-do-not-have-to-pay-so-much-for-health-care](https://www.propublica.org/article/in-montana-a-tough-negotiator-proved-employers-do-not-have-to-pay-so-much-for-health-care) 

[View full post](https://blog.firststophealth.com/business-blog/10-facts-about-reference-based-pricing)

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