6 Ways Employers Can Take Control of Rising Healthcare Costs

Healthcare costs are one of the most significant expenses for many employers, and navigating the complex system can often feel daunting. But it doesn’t have to be this way. While the healthcare industry may seem rigged in favor of larger systems and players, there are strategies employers can use to reduce costs and improve outcomes for themselves and their employees.

Here are six practical steps employers can take to regain control over healthcare spending.

1. Embrace Self-Funding (The Right Way)

Transitioning to a self-funded healthcare plan is a powerful way to take control of your healthcare expenses. In a self-funded arrangement, the employer assumes the risk for claims rather than paying a traditional insurance carrier. This allows greater flexibility in plan design and better insights into cost drivers. However, it’s essential to ensure your self-funded plan is properly managed and not simply administered by a traditional carrier with “off-the-shelf” solutions. Independent third-party administrators (TPAs) can provide more transparency and control, unlike those tied to major insurance networks.

2. Break Free From Traditional PPO Networks

Preferred Provider Organizations (PPOs) may seem convenient, but they often come with hidden costs and limited negotiation power. Employers should explore alternatives like reference-based pricing (RBP) models, which reimburse providers based on a percentage of Medicare rates or other transparent benchmarks. This approach gives employers a clear line of sight into the true costs of services and often results in significant savings without sacrificing the quality of care.

3. Utilize Transparent Pharmacy Benefit Managers (PBMs)

Pharmacy costs are one of the fastest-growing components of healthcare spending. Unfortunately, traditional PBMs often have misaligned incentives that drive up costs. Instead, consider partnering with independent PBMs that offer transparent pricing, disclose their revenue streams, and work as fiduciaries. These PBMs often achieve substantial savings by removing rebates, spread pricing, and other profit-driven mechanisms that increase employer costs.

4. Prioritize Medical Bill Review and Auditing

Errors and overcharges in medical billing are more common than most people realize. According to industry data, up to 91% of facility-based claims contain errors, many of which result in higher costs for employers. By engaging an expert team to conduct regular medical bill reviews and audits, employers can identify and eliminate inaccurate charges, recovering money that was previously wasted. This proactive approach ensures that claims are appropriately paid, reducing unnecessary spending.

5. Engage in Direct Contracting With Healthcare Providers

Employers have the opportunity to negotiate directly with healthcare providers, cutting out middlemen and gaining access to better pricing and services. By establishing direct contracts with hospitals and physicians, employers can negotiate rates that are beneficial for both parties, improve cash flow for providers, and offer high-quality care for their employees. Direct contracting empowers employers to offer tailored healthcare solutions while maintaining transparency and cost-effectiveness.

6. Educate and Empower Employees to Be Savvy Healthcare Consumers

Employers should work to empower their employees to make informed healthcare decisions. This includes offering tools and resources that provide pricing transparency, care navigation assistance, and education on healthcare costs. When employees understand their healthcare benefits and have access to information, they are better equipped to seek out high-value care and reduce unnecessary expenses. Engaging employees as partners in cost control fosters a culture of shared responsibility and can lead to significant savings.

By adopting these strategies, employers can regain control over their healthcare spending and improve outcomes for both their organization and their employees. While change may seem challenging, taking an active approach to healthcare management can lead to a healthier workforce and a healthier bottom line.