A conversation with HR leaders: The shift from PPO to reference-based pricing

In the ever-evolving landscape of employee benefits and healthcare costs, a switch from a traditional PPO plan to an innovative solution like reference-based pricing (RBP) can be a game-changer.

Stephanie Koch, Director of HR at Hendry Marine Industries, and Clint Lautenschleger, Chief People Officer at Restaurant Growth Services, share their experiences and the benefits of transitioning to an Imagine360 health plan.

Tell us about your background and the role RBP has played in your organization.

Stephanie Koch (Hendry Marine Industries): I’m with Hendry Marine Industries. We’re a shipyard located by the Port of Tampa in Tampa, Florida. I’ve been working with Imagine360 for almost eight years now — both with my prior company and now here at Hendry Marine, where I oversee HR. Sixty percent of our workforce is enrolled in our benefit plan. We’re proud to say that we cover 75% of the premium for our employees. By transitioning to RBP, we’ve saved over $20 million in billed charges and $1.5 million in comparison to our previous PPO provider since 2019.

Clint Lautenschleger (Restaurant Growth Services): I’m the Chief People Officer at Restaurant Growth Services. We oversee casual dining companies like O’Charley’s and 99 Restaurants, with over 180 restaurants. In our first year using an RBP plan with Imagine360, we saved $8 million.

What prompted the switch to an RBP plan?

Koch: We experienced significant cost increases from our PPO and we did not want to pass those increases to our employees. Our broker proposed a reference-based pricing solution, which was appealing when we faced an 18% increase with our PPO carrier. This prompted us to make the transition, allowing us to maintain the quality of care while achieving consistent savings over four years.

Lautenschleger: Our decision was driven by the realization that our PPO premiums were escalating, and the plan design changes were chipping away at benefits — leading to a breaking point. We couldn’t continue to pass the burden of these rising costs on to our team members. Similar to Stephanie’s example, we sought options from our broker, which led us to embrace RBP. The financial benefits of this transition were evident right from the start. In year one of our RBP plan, we saw substantial savings of $8 million.

Describe the transition from a PPO plan to RBP for both your organization and employees.

Koch: Our journey with RBP involved incremental plan changes from 2019 to 2021. During this time, we were accruing savings. In 2022, we were able to reinvest a $1 million surplus, opening an on-site medical clinic that boosted the utilization of preventive wellness benefits amongst our employees. Transparency in plan utilization and claims data has also been crucial to its success.

Lautenschleger: Initially, there was a bit of confusion and some people hesitated to use the new system, resulting in fewer doctor visits — which wasn’t ideal. It’s worth stressing that communication is key in these plans. Ensuring that members understand how to leverage the concierge service and can adapt to the new processes is crucial. We realized we could offer a better, more customized plan for employees, which saves money for the team as we saw three years without premium increases. We actually enhanced the medical, vision and dental benefits this year, as well.

How has the member experience been with Imagine360?

Koch: In our case, we took a proactive approach to explain the changes in our open enrollment meetings. We went to great lengths, even discussing with our members the appearance of the ID card, how to explain who you’re insured with, and encouraging providers to verify benefits. Change naturally brings some disruption, and not everyone will be thrilled with it. We learned that the more details we provide, the smoother the transition will be. While we did face challenges, some of the hiccups were on the provider side, resisting the alternatives that exist outside the traditional carrier system.

Lautenschleger: Initially, our team members faced challenges due to a lack of understanding when it came to using their new benefit card. Understanding what to convey to the medical office staff is vital. So we took steps to clarify the process for our employees and medical office staff, like providing the right identification numbers and guiding our employees on what exactly they should say. This approach has significantly improved the member experience.

What was your experience transitioning to RBP from an HR perspective?

Koch: My experience in HR spans 25 years and, when I first learned about this plan, I had my doubts. My primary concern was the level of support we would receive. However, it turned out to be quite the opposite. Employees received more personalized support with one contact person for all their support needs, which enhanced the employee and member experience. Additionally, the level of support is much higher quality compared to my prior experiences working with large carriers.

Lautenschleger: We made the shift to Imagine360 from a previous reference-based pricing vendor around April or May of 2022, and Imagine360 took over our open claims and handled balance bills. At first, we expected challenges and resistance from our team. However, about a month into the transition, we were pleasantly surprised. Claims were being processed faster and at lower costs, and our workload decreased significantly. The communication and collaboration with Imagine360 have been excellent, making the process much smoother.

What advice would you give to HR professionals looking to switch health plans?

Koch: I’d like to emphasize the importance of your broker. HR professionals should ensure their brokers are bringing innovative solutions to the table while prioritizing your company’s best interests. If you’re fully funded and have over 50 employees, seriously consider exploring alternative health plan solutions. The key is to understand and believe that significant cost savings are achievable. As an HR professional, you want to save money while ensuring that your employees aren’t negatively impacted by the change, and prioritizing quality care should always be at the forefront of your approach. Start with your broker to navigate this transition effectively.

Lautenschleger: Convincing your CFO to switch to RBP will be relatively easy since you can demonstrate substantial cost savings. But the crucial first step in switching to RBP is to meticulously plan your employee communication strategy. To me, 99% of the plan’s success largely hinges on how well you can articulate and execute your communication plan to your team members. Switching health plans can be daunting, but you must overcome that initial fear. The savings benefit both the company and employees, leading to better long-term benefits. Working with Imagine360 proved to be a wise decision. It’s important to pick your partners carefully on this and choose an RBP provider that will be there to support your members throughout the transition.

It’s crucial to select RBP partners with a proven track record. A thoughtful approach and strategic partnerships may be the key to achieving long-term cost savings and enhanced employee care.

Imagine360 is a full-service health plan solutions provider that works with organizations nationwide to provide customizable self-funded health plans. We provide support throughout the transition to your new healthcare plan, ensuring that businesses and members are maximizing their healthcare savings. Connect with Imagine360 or download one of our free guides today to learn more about the benefits of switching to an RBP health plan.


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