With group health plan premium increases limited by market and regulatory forces, insurers and self-insurers have raised deductibles, co-insurance, co-pays and other cost-shifting provisions, subject to the ACA’s 2015 maximum out-of-pocket (“MOOP”) limits – $6,600 per individual, $13,200 per family.  But “reference-based pricing” complicates MOOP enforcement.  In Frequently Asked Questions (“FAQ”) guidance issued October 10, 2014, DOL, HHS and IRS revealed their current views on the subject.

A typical group health plan pays substantially more for services rendered by a network provider than for the same services rendered by an out-of-network provider.  Reference-based pricing can be viewed as an alternative to provider network designation.  The insurer sets a price that it will pay for a certain service in a certain market.  All who provide the service for the reference price are, in effect, network providers. Providers who charge more can collect only the reference price from the insurer, leaving their patients exposed to balance billing.

Suppose that the normal covered cost of a procedure in your market is $26,600, and that a non-grandfathered, large group plan subject to the ACA’s 2015 individual MOOP limit therefore would pay at least $20,000.  What if, instead, the plan sets a reference price of $16,600? Is that equivalent to an unlawful, $10,000 individual MOOP provision?  And what if the reference price is so low that it’s accepted only by a single, over-booked surgeon 150 miles away?  Should that be treated the same as a traditional plan’s network adequacy problem?  Summarized briefly, here are major points emphasized in this FAQ guidance.

  • Reference-based pricing should apply only to services that can be delayed long enough to permit patients to shop around.  If reference-based pricing is applied to emergency services, balances paid must count toward the MOOP limit.
  • If the number or quality of providers of the service for the reference price would not meet applicable, functionally equivalent state network adequacy standards, PHS Act § 2707(b) won’t be satisfied, either.
  • Insurers should pay more than the reference price if the service is not reasonably available for the reference price from a high quality provider in the relevant area.

Finally, if the plan uses reference-based pricing, PHS Act § 2707(b) requires these disclosures (quoted verbatim):

Disclosure. Plans should provide the following disclosures regarding reference-based pricing (or similar network design) to plan participants free of charge.

a.  Automatically.  Plans should provide information regarding the pricing structure, including a list of services to which the pricing structure applies and the exceptions process. (This should be provided automatically, without the need for the participant to request such information, for example through the plan’s Summary Plan Description or similar document.)

b.  Upon Request.  Plans should provide:

  i.  A list of providers that will accept the reference price for each service;

  ii.  A list of providers that will accept a negotiated price above the reference price for each service; and

  iii.  Information on the process and underlying data used to ensure that an adequate number of providers accepting the reference price meet reasonable quality standards.