reference pricing

Reference pricing is a strategy where a company or insurer sets a standard price for a product or service, based on typical or competitive rates. Customers are aware of this reference point and may choose options priced above or below it. For example, a health insurance may pay a fixed amount for a medical procedure, encouraging patients to select providers that charge at or below that amount. This approach helps control costs and guides customer choices by establishing a perceived fair or standard price, making it easier to compare options and encouraging competition among providers.