Reference-Based Pricing: A Solution to Help Self-Insured Employers Control Rising Healthcare Costs

November 17, 2025

By Joseph M. DiBella and Greg Fanelli

The Challenge of Rising Healthcare Costs

American employers and plan sponsors [“employers”] are facing unprecedented, relentless increases in employee healthcare costs. According to the Business Group on Health’s Employer Health Care Strategy Survey, employer healthcare expenses have surged by more than 60% over the last decade, outpacing inflation and putting significant pressure on company budgets. Employers can no longer rely on minor plan tweaks or simply shifting costs to employees. The need for innovative, sustainable solutions is more urgent than ever. For many self-insured employers, reference-based pricing, sometimes known as indexed pricing, can be a game changer.

What is Reference-Based Pricing?

Reference-based pricing (RBP) is a transformative approach to managing healthcare costs. Unlike traditional health plans that negotiate network discounts on “chargemaster” (list) prices with hospitals, RBP sets payment rates based on an objective, independent benchmark — typically a set percentage above Medicare rates.

Focused on hospital facility costs, which are the primary driver of skyrocketing healthcare costs, the RBP model brings transparency, predictability and fairness to the hospital inpatient and outpatient healthcare purchasing process — and insulation against spiraling hospital chargemaster prices.

Employers adopting RBP to control hospital costs typically pair it with a traditional PPO physician network for non-hospital care, such as routine patient office visits, which only account for a fraction of employers’ overall health benefit costs.

How RBP Controls Costs

RBP directly addresses the root cause of high healthcare costs: the wide variation and lack of transparency in hospital pricing. As the comparisons below indicate, by anchoring payments to Medicare’s established rates, employers can dramatically reduce their hospital/facility-based care costs.

• National Averages: Traditional insurance plans typically pay about 250% of Medicare rates for hospital services. In contrast, RBP plans often pay 140 to 160% of Medicare rates — a substantial reduction and savings for employers based on a trusted, independent benchmark that also ensures hospitals are paid fairly.
• Real World Savings Example: One organization faced $92 million in billed charges over three years. Under a typical PPO plan with a 60% discount, they would have paid $36.8 million. Using RBP, the actual claims paid were $25.7 million — a savings of over $11 million in three years.*

Employers adopting RBP can see 20–25% reductions in hospital costs, creating room to reinvest in other employee benefits or business growth initiatives.

Hospital/Facility Acceptance

While there is some variance in facilities’ understanding and acceptance, most do accept RBP plans because:

• Reimbursement rates are higher than Medicare, fair, reasonable and designed to support facility profitability.
• RBP claim payments are made promptly, which relieves the stress on facility billing departments that are often overwhelmed and understaffed.

Advantages for Employers and Employees

RBP offers substantial benefits for employers and employees, including:

• Cost Savings: Self-funded employers can achieve reductions of 20 – 25% in their healthcare spend while employees benefit from lower out-of-pocket costs.
• Transparency: Employers and employees know exactly how much is paid for major services, removing the network discount guesswork.
• Broader Facility Access: Employees have access to more hospitals/facilities compared with a traditional plan.
• Potential for Improved Benefits: With lower costs, employers have more flexibility to reduce deductibles, maintain lower employee contributions or enhance other benefits.
• Fiduciary Protection: By tying payments to a recognized and trusted benchmark, employers can defend their plan choices as fair and reasonable.

Five Best Practices for Implementing RBP

Transitioning to RBP can pose employer and employee challenges which require thoughtful planning – with a special focus on the employee experience and plan adoption. Here are five things employers can do to help ensure a successful rollout:

1. Educate employees, dependents and internal teams via year-round resources like videos, FAQs, communication campaigns and meetings to explain RBP and answer questions.
2. Engage partner advocacy and legal teams to help employees with provider access questions, billing inquiries (including balance billing questions) and general benefits support. Comprehensive advocacy services also ease transitions by significantly reducing HR’s workload.
3. Phase-in the rollout by offering the RBP plan as an option alongside existing traditional plans, allowing employees to become familiar with RBP benefits and build confidence.
4. Pair the RBP plan with a traditional physician network, ensuring members have easy access to non-hospital care, such as routine office visits. This will promote preventive care and help avoid, reduce and manage future catastrophic costs.
5. Ensure robust compliance by aligning plans with ERISA requirements, other federal rules such as the No Surprises Act and relevant balance billing legislation.

The Importance of Broker Expertise

Successful RBP adoption demands expertise. An experienced broker plays a pivotal role in:

• Analyzing current claims and modeling RBP savings potential.
• Designing compliant plan documents and aligning with legal requirements.
• Selecting trusted third-party administrators (TPAs) and advocacy partners.
• Rolling out effective employee education and support programs.
• Monitoring outcomes and continuously improving the member experience.

With the right guidance, employers can avoid pitfalls, maximize savings and ensure a smooth transition for their workforce.

The Conner Strong & Buckelew Advantage

Conner Strong & Buckelew brings unmatched in-house expertise to reference-based pricing. Our team has guided organizations of all sizes — including complex, multi-site employers — through successful RBP transitions. We combine strategic plan design, robust advocacy and proven compliance support to deliver measurable savings and improved employee experiences.

If you’re ready to take control of your organization’s healthcare costs and empower your employees with a fair, transparent benefits strategy, contact us today.

*Example based on the actual experience of a Conner Strong & Buckelew client.