Health Care 2020: Connecting the Dots
Part 3: Reference-Based Pricing
Does this sound like the kind of health insurance you’d like to own?
This may seem like a new way to pay for care, but it’s actually what almost every insured person did prior to HMOs and managed care medical delivery. The insurance company never told you what doctors to use – you chose the doctors you liked and trusted. The insurance company paid the bills based on a set amount. This allowed premiums to remain stable and affordable.
The “new” way to pay is called Reference-Based Pricing – a self-managed health insurance policy.
How can you determine how much you will pay in premium? One option is to buy an insurance policy that pays the same as Medicare. This would reduce your premiums by 40-50% or more, depending on where you live.
Or you might choose to buy a policy that pays 200% of Medicare’s allowed amount, which is a 100% tax (see Hidden Health Care Tax). At this level, your premiums would be much like they are today.
You choose the different tax amounts you are willing to pay over Medicare – 110%, 120%, 130%, etc. The more tax you elect, the greater your premium. Annual premium increases will be linked to Medicare’s annual increases. These are historically below two percent a year, making reference-based insurance premiums stable and keeping them affordable.
The doctor visit with the new insurance plan
Today, you go to the provider your health plan has chosen for you. You sign an agreement that you will pay whatever you are charged with no idea of how much the charge will be.
With reference-based insurance, the provider will give you a disclosure showing how much they charge related to Medicare. If the provider charges you the Medicare rate, no disclosure is necessary – but if more, that percent will be disclosed to you. If you agree with the additional charges above Medicare, you will sign an agreement showing your insurance company that you understand how much the provider charges above Medicare.
When the provider submits a claim to the insurance company, the disclosure will be included with the bill. This proves to the insurance company that you have agreed to the provider’s charged amount over Medicare (the Hidden Tax). If the provider doesn’t send the signed disclosure, the insurance company will reimburse at the Medicare rate. You would not be responsible for any amount over the Medicare rate.
Here are three examples.
Accident Reimbursement Rider
An individual would be able to buy a rider to the insurance plan that pays a higher reimbursement amount in the case of an accident that results in incapacitation. These are the instances where the individual needs immediate care and there is no time or ability to sign a Medicare-disclosure. Such a rider might pay up to 200% of Medicare, or some other amount chosen by the policy-owner, but the key feature is that money is available for care when a person is physically or mentally unable to sign a Medicare-plus disclosure.
What about employer group insurance?
Employers will have the same options as they do today, to choose from several different medical plans to offer to employees. Employers may choose to pay a flat amount, allowing the employee to choose his or her own medical plan with different payroll deductions. For certain, there would be more affordable options for employers and employees, and premium increases will be a fraction of what they are today.