Cost Plus Pricing


Cost Plus Pricing or Reference Based Pricing is the perfect addition to Self-Funded and Consumer Directed health plans. It limits what will be paid for covered healthcare expenses. Similar to a comprehensive major medical plan, members typically have a deductible with the plan paying up to each respective limit for covered expenses. In order to determine what will be paid for a covered benefit, many plans base their payment schedules on Medicare, the most widely known and widely accepted index.

In Cost Plus Pricing, the plan and area hospitals typically agree on a pre-determined margin – perhaps 15% to 20% over Medicare.

PPO Networks Are Eliminated

The most significant difference between a health plan with Value Based Pricing and a traditional PPO plan is that no provider network is involved. While some health plans may still contract with a physician network, Value Based Pricing eliminates hospital networks in favor of pre-negotiated price schedules.

Years ago, PPO networks offered a real advantage because many providers participated in only one network. Today, the lines have blurred and many providers belong to every network in a given market, diminishing the real value of a network discount.

True Cost Transparency – The Greatest Benefit

A need for price transparency, especially among smaller groups, makes it very hard to identify the real savings in a PPO environment. As studies have long shown, the price for a given healthcare procedure performed in the same city can vary greatly, often with little difference in quality. As long as these conditions persist, interest in Cost Plus or Value Based Pricing will continue to grow as employers look for ways to better manage the costs and future risks of healthcare.

Learn More About Reference Based Pricing

Tune into a podcast with Brooks Goodison, President of Diversified Group, as he discusses the challenges, surprises and keys to success gained from more than a decade of experience with this pricing model. Whether you’re a plan sponsor or a broker anxious to learn from peers with experience on the front lines, you’ll benefit from this episode of Healthcare Uncensored LIVE!


Self-insured health benefit plans offer greater flexibility and an opportunity for savings.


Specialty drugs represent a growing percentage of total drug spending. Pharmasense fights these escalating costs.


We address questions that are going unasked or unanswered and discuss the trends and issues having the most impact on employee benefits.