Reference-Based Benefit Design Programs

Reference-based pricing originated in Europe to control health care spending due to price variation for pharmaceuticals within the same therapeutic class. In the United States, however, reference-based benefit design programs primarily exist because of significant unwarranted price variation for medical tests, procedures, and services that are relatively homogenous—and the inability of insurers and third-party administrators to reduce such variation.

While there are some critics of reference-based benefit design, most published studies have shown it to be effective at shifting utilization to lower priced providers, resulting in significant reductions in overall spending for these covered services. However, the use of reference-based benefit design is not widespread and unfortunately unlikely to grow unless insurers and third-party administrators, including large national insurers, make reference-based benefit design easier to implement in local markets by developing communications strategies and digital tools that do not require significant investment and management from plan sponsors.

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Scanlon, D. P. (2020). If reference-based benefit designs work, why are they not widely adopted? Insurers and administrators not doing enough to address price variation. Health services research.