The pilot employed what is known as a reference pricing strategy, which Robinson describes as a "reverse deductible." For a typical health insurance plan members pay several thousand dollars in deductibles or copayments and the insurer picks up the rest of the tab. For reference pricing, employers agree to pay a certain amount for a procedure and anything above that amount is the employee's responsibility.
In its simplest form, reference pricing is like the daily per diem an employer pays for business travel. "You get $65 per day. You can spend more, but anything above $65 comes out of your pocket."
For the two-year pilot, CalPERS set a $30,000 limit on what it would allow Anthem to pay for the procedures. The insurer identified 46 hospitals across the state as value-based purchasing design facilities. To qualify, hospitals had to be part of the Anthem network, perform enough of the procedures to demonstrate skill, and charge less than $30,000 for the in-patient costs associated with each surgery.
By having the surgeries performed at a value-based facility, members paid little or no out-of-pocket costs beyond a deductible or copayment. However, if they went to a hospital that charged more than $30,000, then they had to pay the difference.
In 2011 CalPERS health plan costs dropped by 19% percent from $35,408 to $28,695 per surgical-related admission. Over two years it posted an estimated savings of $5.5 million.