Commercial prices relative to Medicare were lower under an employer-based reference pricing program

Reference-based pricing has shown promise in reducing hospital prices and spending for state employee health plans. However, its impact among other commercially insured populations is not well understood.

We examined price and spending differences under an alternative health plan's reference pricing program for self-funded employers relative to prices paid by employers and commercial payers from Round 5.1 of the Employer Hospital Price Transparency Study. The program we studied paid hospitals at approximately 140% of Medicare payments.

We found that the prices paid to hospitals were significantly lower than prices paid by other commercial payers. As a percentage of Medicare, the reference pricing program paid, on average, 118% points less for inpatient services and 162% points less for outpatient services. Relative to the prices paid by other commercial payers, we estimated that employers saved $417 million under the reference-based pricing program.

These savings represent 56.5% of what they would have spent on hospital care had they paid similar rates as other commercial payers.