1. Home /
    2. Article /
  2. 3 ways to reduce health care costs 
3 ways to reduce health care costs 
Article

3 ways to reduce health care costs 

There are opportunities for employers and their advisors to counter cost drivers and maximize their benefits spend, ensuring they can provide the benefits employees have come to expect.

By Abbie Leibowitz, M.D., F.A.A.P. | BenefitsPRO

Despite ongoing efforts across the industry to combat rising health care costs, employers continue to face a climbing upward trend. Estimated annual increases to employers’ health care spending range from 5.4% up to 8.5%, and KFF’s 2023 Employer Health Benefits Survey reports premiums went up 7% last year. While employees are seeing an uptick in their contributions, employers are absorbing the majority of these costs. Employers and their benefits advisors want to provide employees with robust and comprehensive benefits, but it is increasingly critical to find strategies to help manage the associated costs. 

The first step is understanding the factors driving this ongoing upward cost trend. Some of the key contributors include: 

  • Specialty drugs – The most recent Business Group on Health Large Employer Survey found that more than 90 percent of employers expressed concerns about the impact of high-cost specialty drugs, and this was largely before the explosion of interest in GLP-1s was a factor. Pharmacy coverage continues to be a primary cost driver for employers, with its percentage of employers’ total health care spend increasing from 21% in 2021 to 24% in 2022, and those costs are only continuing to rise as more of these medications enter the market.
  • Ongoing pandemic repercussions – At the height of the pandemic, many people delayed care, including treatment for chronic conditions and preventive screenings, and the impact of that is being felt now in terms of both outcomes and costs. For example, data shows that preventive care screenings dropped well below usual levels during the pandemic, so experts and employers alike are anticipating a surge in later-stage cancer diagnoses and avoidable complications of chronic conditions, significant cost drivers that half of employers indicate is their top contributor to increased costs.
  • The complexity of benefits – In response to rising costs, many employers have shifted more responsibility to their employees to manage their own care. However, without providing the employee with easy access to the support needed to navigate the health care system, this leads to more unnecessary care, less focus on the value of care, and unfortunate outcomes.

There are opportunities for employers and their advisors to counter these cost drivers and maximize their benefits spend, ensuring they can provide the benefits employees have come to expect.

Strategies to balance costs with benefits needs

Continuously rising health care costs are challenging employers and their advisors to think creatively in order to continue offering robust benefits programs that help engage employees in their health and wellbeing. Consider the following strategies to help find the right balance and provide premium benefits while managing costs: 

1. Streamline and consolidate benefits programs. Conducting an audit of all current benefits offerings can help identify both underutilized programs and duplicate capabilities, offering an opportunity to evaluate potentially extraneous programs and maximize current investments in benefits. While the plethora of point solutions may offer potential value, they don’t work if employees aren’t using them, and having too many can add to the complexity of the benefits program employees must navigate. Further, a fragmented approach with numerous vendors can compound administrative burdens, create duplicative and overlapping services, and contribute to unnecessary extra costs. By breaking down silos and consolidating benefits offerings, programs can run more cost-efficiently and return greater value on employers’ investments. Adapting existing offerings and incorporating a holistic, integrated benefits strategy can enhance the experience of the employee interacting with their benefits program, driving engagement and value while reducing costs for organizations.

2. Offer navigation and decision support to help employees make the most of their benefits. Just because you build it does not mean they will come. The health care system is complex, and without expert support, employees can become overwhelmed and unsure where to turn when they need care, so they may turn nowhere at all. By incorporating navigation and decision support services, brokers, advisors, and their clients can ensure employees have access to experts to help guide them to the right benefits at the right time, help them make informed decisions about their care, and provide the resources necessary to engage in their health and well-being. Not only does this improve employee engagement, utilization, and access, but it enhances employers’ return on their benefits investments.

3. Leverage the value of data analytics. Integrating and analyzing data from multiple sources can provide insights into the effectiveness of current benefits offerings. However, data can offer a much deeper understanding and actionable information to help predict and manage costs. 

AI, machine learning, and natural language processing algorithms can uncover unique health needs and provide recommendations to employees and their family members to get the specific care they need. This data-driven, personalized outreach, especially when distributed through multiple channels, drives individuals to take necessary action, such as getting preventive screenings to address potential risks and complying with recommended care for chronic conditions. A proactive approach to care is much more cost-effective and results in better outcomes as well. 

Additionally, data also has the power to help employers address challenges around prescription drugs, a primary cost driver. From sending targeted reminders that improve adherence to identifying cost-effective resources to remove barriers to accessing necessary medications, the impact is far-reaching. 

Data can be utilized to identify high-value care across the spectrum of needs, not just medications. Brokers, consultants, and their employer clients can counter the medical cost curve by implementing digital solutions, backed by extensive data analytics and supported by experts, which connect employees to high-value care tailored to their unique preferences and needs. Providing this seamless access to high-quality providers leads to better outcomes and more cost-effective care, benefiting both individuals and their employers.

Finding smart, effective strategies to reduce costs does not have to mean sacrificing the quality, breadth, or types of impactful benefits organizations endeavor to provide their workforce. It is possible for brokers, advisors, and others to help their clients achieve meaningful value and cost savings while continuing to provide the innovative, personalized, and comprehensive benefits expected by organizations and their employees, increasing engagement while improving outcomes and well-being.

Arthur “Abbie” Leibowitz, M.D., F.A.A.P., is Chief Medical Officer and Co-founder at Health Advocate, a leading provider of health advocacy, navigation and integrated benefits programs. Abbie is a nationally recognized leader in the health care industry and an authority on managed care, clinical management, quality assurance, and medical data and information systems.