4 Ways Employers Can Cut Health Care Costs Without Upsetting Employees

U.S. employer health care costs are set to increase by 6.5% in 2020. Large employers cover approximately 70% of health care costs — $10,500 per employee, according to the Society for Human Resource Management (SHRM). A 6.5% increase (i.e., approximately $700) per employee is a significant amount to absorb into any budget, and it highlights the need for an employer cost reduction strategy.

To reduce premiums, employers need ways to help employees become — and stay — healthy, which comes with added benefits like reduced absenteeism. At the same time, it’s equally important to steer employees toward cost-conscious health care options that don’t compromise care quality.

How can you meet both needs? Here are four cost reduction strategies to consider for 2020 and beyond.

1. Provide Enhanced Wellness Benefits

Reducing employer health care costs requires a holistic approach to employee well-being. This entails going beyond physical health to consider factors like financial stability, mental health, social connection, substance abuse and employee assistance. Employers can also use HIPAA-compliant data analytics and segmentation to create a wellness program that’s tailored to individual employees.

2. Focus on High-Quality Providers

In 2019, 18% of employers contracted directly with health care centers of excellence, according to SHRM. Just over 10% contracted directly with accountable care organizations (ACOs), along with high-performance networks that limit in-network physicians, clinics and hospitals to just the ones with strong track records of delivering high-quality, low-cost care. In 2020, 24% of employers plan to encourage employees to consider physician-based ACOs or high-performance networks via plan design or referrals. These settings offer employees coordinated, high-quality care that helps improve health outcomes and reduce costs. For example, Walmart sends its staff to one of 16 different health systems depending on the type of care the employee needs. Other partnerships, such as those between PepsiCo and Johns Hopkins Medicine or Lowe’s Companies and Cleveland Clinic, have also helped employers feel confident that their employees will receive high-value care.

3. Steer Employees Toward Telehealth

Large employers rely on technology to drive down costs. Virtual care services, such as telehealth, can help employees address nonurgent medical concerns and mental health issues with tools such as health and lifestyle coaching, weight management, diabetes care management and medical decision support. More than half of large companies say that adding more virtual care solutions is a top priority in their employer cost reduction strategy, according to SHRM.

4. Be Intentional in Your Benefits Design

Employers can’t move the needle on cost alone. The plan you choose should engage employees in their own health and get them invested in high-value care for themselves. This includes providing options that facilitate chronic disease management, educate employees about health risks, assign health coaches to help employees improve their health and provide incentives to make healthy choices.

To promote this level of engagement, many employers give their workforce more than one route to getting coverage. In 2020, 64% of employers say they will offer multiple plan options, including at least one high-deductible health plan option that shifts the majority of the financial burden from employer to employee. Offering multiple options empowers employees to choose a plan that fits their budget and meets their needs. However, employers should also educate employees about how these plans work and encourage them to participate in health savings accounts.

A firm employer cost reduction strategy gives employers a blueprint to help cut health care costs while keeping employees happy and healthy. It’s a delicate balance — but one that’s achievable through careful planning and consideration for your workforce.

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