3 ways to reduce healthcare costs
Despite industry-wide efforts to combat rising healthcare costs, employers continue to face a rising trend. Estimated annual increases in employer healthcare spending range from 5.4% to 8.5%, and KFF’s 2023 Employer Health Benefits Survey reports that premiums increased 7% last year. While employees are seeing an increase in their contributions, employers are bearing the majority of these costs. Employers and their benefits partners want to provide employees with robust and comprehensive benefits, but it’s increasingly important to find strategies to manage the associated costs.
The first step is to understand the factors driving this ongoing cost increase. Key factors include:
- Special medicines – The Business Group on Health’s most recent survey of large employers found that more than 90% of employers expressed concerns about the impact of expensive specialty drugs, and this was largely before the explosion of interest in GLP-1 was a factor. Pharmacy coverage remains a major cost driver for employers, rising from 21% in 2021 to 24% in 2022 as a share of total employer healthcare spending, and those costs are only continuing to rise as more of these drugs come to market.
- Continuing effects of the pandemic – At the height of the pandemic, many people delayed medical care, including treatment for chronic diseases and preventive care. The consequences of this are now being felt in terms of both outcomes and costs. For example, data shows that the number of preventive care visits has fallen well below usual levels during the pandemic. Experts and employers therefore expect an increase in late-stage cancer diagnoses and preventable complications of chronic diseases. These cost drivers are the biggest cost driver, according to half of employers.
- The complexity of the benefits – In response to rising costs, many employers have given employees more responsibility for their own care. However, not giving employees easy access to the support they need to navigate the health care system leads to more unnecessary care, less focus on the value of care, and unfortunate outcomes.
There are ways for employers and their partners to address these cost drivers and maximize their benefits spending to ensure they can provide employees with the benefits they expect.
Strategies to balance costs and benefits
Ever-increasing healthcare costs are challenging employers and their partners to think creatively to continue to offer robust benefits programs that help employees take ownership of their health and well-being. To find the right balance and provide top-notch benefits while managing costs, consider the following strategies:
#1: Streamline and consolidate benefit programs
An audit of all current benefits offerings can help identify both underused programs and duplicated features. This provides an opportunity to evaluate potentially irrelevant programs and maximize current benefits investments. While the multitude of point solutions can be potentially valuable, they don’t work if employees don’t use them, and too many of them can increase the complexity of the benefits program that employees must contend with. In addition, a fragmented approach with numerous vendors can increase administrative burden, create duplicate and overlapping services, and contribute to unnecessary overhead. Breaking down silos and consolidating benefits offerings can help programs run more cost-effectively and provide employers with greater value for their investment. Aligning existing offerings and incorporating a holistic, integrated benefits strategy can improve employees’ experience interacting with their benefits program, increasing engagement and value while reducing costs for organizations.
#2: Provide navigation and decision-making support to help employees make the most of their benefits
Just because you can get there doesn’t mean they will. The healthcare system is complex, and without expert support, employees can be overwhelmed and unsure of who to turn to when they need help, so they may not even reach out. By incorporating navigation and decision support services, brokers, advisors and their clients can ensure employees have access to experts who can help them find the right benefits at the right time, help them make informed decisions about their care, and provide them with the resources they need to take care of their health and well-being. This not only improves employee engagement, utilization and access, but also increases employers’ return on their benefits investment.
#3: Leverage the value of data analytics
Integrating and analyzing data from multiple sources can provide insights into the effectiveness of current benefit offerings, but data can provide a much deeper understanding and actionable intelligence to help predict and manage costs.
AI, machine learning, and natural language processing algorithms can uncover individual health needs and provide recommendations to employees and their families on how to get the specific care they need. This data-driven, personalized outreach, especially when distributed across multiple channels, prompts individuals to take necessary actions, such as screenings to avoid potential risks and following recommended care for chronic conditions. A proactive approach to care is much more cost-effective and also leads to better outcomes.
In addition, data can also help employers address challenges related to prescription drugs, a major cost driver. The impact is wide-ranging, from sending targeted reminders that improve compliance to identifying cost-effective resources to eliminate barriers to accessing necessary medications.
Data can be used to identify high-quality care across the spectrum of needs, not just medications. Brokers, consultants and their employer clients can buck the medical cost curve by implementing digital solutions, backed by extensive data analytics and expert support, that connect employees to high-quality care tailored to their individual preferences and needs. This seamless access to high-quality providers leads to better outcomes and more cost-effective care that benefits both individuals and their employers.
Finding smart, effective cost-cutting strategies doesn’t have to mean compromising the quality, scope or type of impactful benefits companies want to offer their employees. Brokers, consultants and others can help their clients achieve meaningful value and cost savings while delivering the innovative, personalized and comprehensive benefits companies and their employees expect – increasing engagement while improving outcomes and well-being.
Arthur “Abbie” Leibowitz, MD, FAAP., is Chief Medical Officer and co-founder of Health Advocate, a leading provider of healthcare consulting, navigation, and integrated benefits programs. Abbie is a nationally recognized leader in the healthcare industry and an authority on managed care, clinical management, quality assurance, and medical data and information systems.
