Beyond Self-Funding: Why Reference-Based Pricing Is Changing the Healthcare Cost Conversation
By Vinny Catalano, Founder & CEO, CLEAR Healthcare Solutions
[Clip about Reference-Based Pricing (RPBs) with guest Mike Trent]
Tune into the full episode on the CLEARly Beneficial podcast with your host, Vinny Catalano, and guest, Dr. Raymond Fabius. Listen on Buzzsprout, Substack, YouTube or any of your favorite podcast channels.
If you’re an employer who made the leap to self-funding your health plan, congratulations—you’ve already taken an important step toward controlling healthcare costs. But here’s the uncomfortable truth that most brokers won’t tell you: self-funding alone doesn’t solve your cost problem.
In Episode 6 of The CLEARly Beneficial Podcast, I sat down with Mike Trent, a 30-year veteran of health plan financing, to discuss an alternative funding strategy that’s quietly revolutionizing how savvy employers approach healthcare costs: Reference-Based Pricing (RBP).
The Self-Funding Illusion
Let’s start with what most employers don’t realize. When you move from a fully insured plan to a self-funded arrangement, you’re essentially taking on the financial risk yourself. That’s the first step. But here’s what happens next: most self-funded employers still use a PPO network for provider reimbursements.
“When employers self-fund but stay in a PPO network, they’re often still paying the same inflated hospital rates—around 250% of Medicare—that they were paying when fully insured,” Mike explained during our conversation. “They think they’ve solved their cost problem, but they’re really just paying the bills differently.”
This is the dirty secret of healthcare cost-shifting that employers need to understand. While Medicare reimburses hospitals at established rates, and Medicaid typically pays even less, commercial insurance—including self-funded plans using PPO networks—subsidizes the difference. Employers bear the burden of this cost-shifting, often without realizing the extent of the markup they’re accepting.
Enter Reference-Based Pricing: A Different Approach
Reference-Based Pricing flips the traditional model on its head. Instead of accepting whatever negotiated rate a PPO network has established with a hospital, RBP plans reimburse providers at a percentage above Medicare—typically around 150% compared to the PPO’s 250%.
Let that sink in for a moment. That’s a 100-percentage-point difference on every hospital claim.
Mike shared a powerful personal example that brings this home: “My wife had a 24-hour hospital stay that generated a $67,000 bill. Under our RBP program, after negotiation, we paid $7,000. And critically, there was no balance billing risk to us as employees—the RBP firm handled everything.”
When you apply that kind of savings across all your claims throughout a year, the numbers become staggering. Mike’s rule of thumb? Expect potential savings of around $150,000 per 100 employees annually.
The Balanced Billing Question Everyone Asks
The first objection I hear whenever RBP comes up in conversation is always the same: “What about balanced billing? Won’t my employees get stuck with huge bills?”
It’s a legitimate concern, and Mike addressed it head-on during our discussion. Here’s the reality: employees are not responsible for balanced billing under RBP plans. The RBP vendor takes on that responsibility and handles the negotiations with providers.
“About 85% of the time, hospitals accept the offered reimbursement without any back-and-forth,” Mike explained. “The remaining 15% requires some negotiation, but that’s what the RBP company is there for. They have to be really good at this to avoid dissatisfied employees—especially if one of those employees happens to be the CEO.”
The industry has evolved significantly in recent years. Early RBP vendors sometimes stumbled on the negotiation piece, leading to employee frustration. Today’s reputable RBP firms have built sophisticated negotiation capabilities and legal frameworks to protect employees completely.
Who Should Consider RBP (And Who Shouldn’t)
Not every employer is a good candidate for RBP. During our conversation, Mike and I explored when RBP makes sense and when it doesn’t.
Good candidates for RBP:
- Self-funded employers (RBP requires self-funding)
- Companies with 50+ employees, though smaller groups can participate
- Blue-collar employers particularly focused on cost control
- Organizations willing to engage their CFO in the healthcare financing discussion
- Employers in regions like the Southeast and California where RBP adoption is growing
Not ideal for RBP:
- Fully insured employers (you must transition to self-funding first)
- Companies unwilling to change their approach to provider networks
- Organizations where HR lacks C-suite support for benefit strategy changes
Mike made an important observation about RBP adoption patterns: “We’re seeing RBP take off more with blue-collar employers who are laser-focused on cost control. But really, any employer size can benefit if they’re willing to make the transition and they’re already self-funded.”
The CFO Conversation: Why This Isn’t Just an HR Decision
One of the most critical insights from our discussion was about who needs to be at the table for RBP conversations.
“This is fundamentally a financial discussion that requires fiduciary responsibility,” I emphasized during the episode. “You need to engage CFOs and C-suite executives, not just HR.”
The new fiduciary responsibility rules pushing transparency in healthcare are accelerating this shift. Some RBP vendors are now taking on fiduciary responsibility for health plans, which creates better alignment and leads to improved financial outcomes.
Mike agreed: “When we approach potential RBP clients, we’re highlighting both the cost reduction—that $150,000 per 100 employees figure—and the employee support services. But we’re making sure we’re having that conversation with decision-makers who understand the financial implications.”
RBP’s Impact on Employee Experience
Beyond the employer cost savings, RBP can actually improve the employee experience in some surprising ways.
Because RBP generates such significant savings, employers have more financial flexibility to:
- Lower employee deductibles
- Reduce out-of-pocket maximums
- Expand coverage for specific services
- Invest in wellness programs and preventive care
“RBP is particularly effective in reducing costs for major medical procedures and chronic illnesses,” Mike noted. “Those are the big-ticket items that drive costs up in traditional PPO arrangements.”
Additionally, RBP plans typically allow members to choose any provider without network restrictions—the RBP vendor handles negotiations with whoever the employee selects. This actually expands choice compared to narrow network PPO plans.
The Skills Gap in Benefits Consulting
A sobering theme emerged during our discussion: there’s a significant skills gap in the benefits consulting industry around alternative funding methods like RBP.
“Transitioning from fully insured to self-funded, and then to reference-based pricing plans, requires a specific skill set and continuous learning,” Mike observed. “Not every broker or consultant has invested in developing that expertise.”
This is precisely why I’m developing the Clear Benefits Academy, which we’re planning to launch in 2026. The goal is to educate brokers and consultants on innovative funding methods so they can better serve their employer clients.
Mike’s passion for RBP education was evident throughout our conversation. “This is why I joined my current company,” he shared. “I saw the potential of RBP to really transform healthcare affordability, and I wanted to help more people understand this concept.”
The Honest Conversation About Downsides
Unlike a typical vendor-sponsored podcast, Mike and I didn’t shy away from discussing RBP’s potential downsides and challenges.
We talked about:
- The 15% of cases that require active negotiation
- The transition challenges for employers moving from PPO to RBP
- Employee communication and change management requirements
- The importance of selecting a reputable RBP vendor with strong negotiation capabilities
- Regional variations in RBP adoption and acceptance
“This isn’t a sales pitch,” I told Mike during the episode. “It’s an honest exploration of when RBP makes sense and when it doesn’t.”
That’s the unmuzzled perspective I bring to every episode of The CLEARly Beneficial Podcast. With over 21 years in the industry but no corporate employer to answer to, I can ask the hard questions and have the honest conversations that employed professionals often can’t touch.
The Future of Healthcare Funding
As we wrapped up our conversation, Mike and I discussed the growing prevalence of RBP models across the country. While adoption varies by region, the momentum is undeniable—particularly as employers face continued double-digit premium increases under traditional arrangements.
“We’re seeing significant growth in the Southeast and in California,” Mike noted. “As more employers share their success stories and as the industry matures, I think we’ll see RBP become a much more common part of the benefits conversation.”
For employers frustrated with the endless cycle of rising healthcare costs, RBP represents a fundamentally different approach. It’s not just tweaking around the edges of the traditional model—it’s rethinking how we compensate providers and who bears the financial risk.
Key Takeaways for Employers and Brokers
If you’re considering RBP for your organization, here are the essential points to remember:
- Self-funding is a prerequisite – You must be self-funded before RBP is even an option
- The math is compelling – Potential savings of $150,000 per 100 employees annually
- Balanced billing isn’t the risk people think – Reputable RBP vendors protect employees completely
- CFO engagement is critical – This is a financial decision, not just an HR benefits decision
- Vendor selection matters – Choose RBP firms with strong negotiation capabilities and track records
- Employee communication is essential – Change management will determine success or failure
- Regional considerations exist – RBP adoption and acceptance vary by geography
Listen to the Full Episode
This article only scratches the surface of our 30-minute conversation. To hear Mike’s complete insights on RBP, including specific examples, negotiation strategies, and his advice for brokers introducing RBP to clients, listen to Episode 6 of The CLEARly Beneficial Podcast.
We also discussed Mike’s wine preferences (Pinot Noir, naturally) and his journey from traditional health plan roles into the world of reference-based pricing—including the personal experiences that convinced him RBP was the future.
Join the Conversation
The CLEARly Beneficial Podcast brings you unfiltered insights into healthcare benefits and financing. No corporate muzzle. No sugarcoating. Just honest conversations with industry veterans who are actually solving problems, not just selling products.
Subscribe on Apple Podcasts, Spotify, or wherever you listen to podcasts. New episodes drop weekly.
And if you’re a benefits broker or consultant who wants to level up your expertise on alternative funding strategies like RBP, stay tuned for details about the Clear Benefits Academy launching in 2026.
Connect with me on LinkedIn at www.linkedin.com/in/vcatalano or visit www.clearhcs.com to learn more about CLEAR Healthcare Solutions.
About Mike Trent
Mike Trent is VP of Business Development at ClaimDOC, bringing over 30 years of experience in consulting and managing alternate-funded and fully insured employee benefits programs for employers of all sizes. Through his work with various employee benefits administration firms, he gained deep understanding of the internal mechanics that form the backbone of self-funded programs, leading him to pursue the most effective point solutions available to manage and decrease health plan claims and utilization. In recent years, his expertise has grown in analyzing and consulting reference-based pricing programs, direct contract hospital partnerships, and unique navigation services to specialty providers.
About CLEAR Healthcare Solutions
CLEAR Healthcare Solutions is a consulting firm specializing in medical practice improvement, employee benefit strategy, point solution go-to-market strategy, expense reduction, and healthcare and insurance education. The company leverages over two decades of industry relationships and expertise to bring fresh perspectives to healthcare and business challenges.
About The CLEARly Beneficial Podcast
The CLEARly Beneficial podcast rips off the band-aid on healthcare and explores the future of benefits with industry innovators. Whether you’re an insurance broker, HR professional, employer, or engaged professional, the podcast delivers straight talk and actionable insights from someone with decades in the trenches. The show takes a solution-oriented approach, featuring conversations with healthcare CEOs, authors, innovators, and leaders driving positive change across industries.
New episodes are released weekly on all major podcast platforms.
For more information, visit www.clearhcs.com or connect with Vinny Catalano on LinkedIn at www.linkedin.com/in/vcatalano.
Disclaimer: This content is for educational purposes only. Please discuss your specific situation with your health benefits administrator or insurance provider for personalized guidance.