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Reference pricing in health insurance creates incentives for patients to select for nonemergency services providers that charge relatively low prices and still offer high quality of care. It changes the "choice architecture" by offering standard coverage if the patient chooses cost-effective providers but requires considerable consumer cost sharing if more expensive alternatives are selected. The short-term impact of reference pricing has been to shift patient volumes from hospital-based to freestanding surgical, diagnostic, imaging, and laboratory facilities. This article summarizes reference pricing's impacts to date on patient choice, provider prices, surgical complications, and employer spending and estimates its potential impacts if expanded to more services and a broader population. Reference pricing induces consumers to select lower-price alternatives for all of the forms of care studied, leading to significant reductions in prices paid and spending incurred by insurers and employers. The impact on consumer cost sharing is mixed, with some studies finding higher copayments and some lower. We conclude with a discussion of the incentives created for providers to redesign their clinical processes and for efficient providers to expand into price-sensitive markets. Over time, reference pricing may increase pressures for price competition and lead to further cost-reducing innovations in health care products and processes. [ABSTRACT FROM AUTHOR]

The prices paid in 2019 by Blue Cross Blue Shield health plans in hospital outpatient departments were double those paid in physician offices for biologies, chemotherapies, and other infused cancer drugs (99-104 percent higher) and for infused hormonal therapies (68 percent higher). Had these plans excluded hospital clinics from their networks, channeling all of the infusions to physician offices, they would have saved $1.28 billion per year, or 26 percent of what they actually paid. Had they relied on cost-sharing incentives to channel infusions to physician offices--with either uniform 20 percent coinsurance or reference pricing--they would have realized savings but increased the financial burden on patients who received care at the higher-price hospital clinics. Under 20 percent coinsurance, patients' payment obligations for care at hospital clinics would have exceeded those for care in physician offices by a median of 67 percent for biologies, 72 percent for chemotherapies, 87 percent for hormonal therapies, and 75 percent for other cancer drugs. Large savings are potentially available to commercial insurers from shifting cancer infusion care to nonhospital settings, but cost-sharing burdens could become very high for patients. [ABSTRACT FROM AUTHOR]