Four Ways Employers Are Managing Rising Healthcare Costs

Rising healthcare costs have long challenged employers and remain an urgent concern today. About 6 in 10 Americans say they’re worried about the costs of healthcare, and employers are looking for ways to slow cost growth while still meeting the needs of their workers.

Here are four ways employers and health plans are working together to manage rising costs.
 

Consolidating Health Plans

Just as it’s simpler to shop at one grocery store instead of several, many employers are choosing to work with a single health plan provider. The goal is to simplify administration, improve the employee experience, and reduce unnecessary costs.

After a 2020 merger, one national company in our business portfolio had more than 200,000 employees covered by more than 100 health plans across four different plan providers. The company decided to move its health plans to just one health benefits organization. By doing this, it combined care provider networks, clinical programs, and care management under one system. That reduced confusion about how care was delivered and supported, while also lowering administrative costs and eliminating duplicate services.
 

Rethinking Plan Design

Alongside employers’ focus on managing costs, consumers’ desire for simpler ways to find care — and for transparency in what they’ll pay for that care — has helped drive the growth of “alternative” health plans (AHPs). These plans typically use broad provider networks, and their design makes it easier for employees to choose high-quality, lower-cost options that match their needs.

Digital tools play a starring role in how AHPs can reduce costs for employers and employees. In these plans, employees often begin their search for care using a mobile app. Care providers are grouped into tiers or designated as “preferred” providers based on factors including cost and quality. The app shows how much the employee will pay, and helps them find care that’s both high-quality and cost-effective.

In some cases, these plans are “copay only,” meaning employees pay a set amount for an office visit or medical procedure. That amount can vary depending on the complexity of the procedure or negotiated rates, but deductibles and coinsurance do not apply. Other plans offer hybrid options: An employee may have a copay for an office visit, for example, while coinsurance kicks in for a surgery.

One Elevance Health-affiliated AHP encourages employees to take an active approach to their care by giving members cash rewards when they choose preferred facilities for certain planned procedures, helping to reduce the cost of those procedures at the same time. For example, an employee could receive a cash incentive in the form of a gift card for choosing to have a knee replacement at an ambulatory surgery center instead of a hospital.

Employers tend to offer AHPs in addition to traditional plans. As interest in and adoption of AHPs continue to grow, so do efforts to further streamline and simplify them. For example, future approaches might include giving members a “wallet” of money for routine and preventive services, and pairing that with an app-based shopping experience that helps employees make informed decisions about their care.
 

Getting Smarter About Specific Solutions for Complex Conditions

Sometimes called a “point” solution, when offered as part of a health plan, these add-ons address a specific health issue that is common in a particular employee population, such as musculoskeletal injuries. They often operate separately from the main health plan, with their own apps or service teams.

Many employers adopt these specialized programs for their employees to better support complex conditions that often require more appointments, monitoring, and testing — which also results in increased spending. Over time, however, some employers have acquired dozens of separate vendors, leading to overlapping services and disjointed proof of any success in reducing costs.

Employers are now asking tougher questions:

• Do we have claims data and outcomes to prove this program lowers the cost of care?
• Are employees actually benefiting from it?

Elevance Health-affiliated plans have set higher standards for the point solutions we recommend. We look for solutions that show measurable improvements in health outcomes and real cost reductions.

At the same time, many employers are simplifying access for their employees. Instead of asking employees to manage multiple apps and phone numbers, they provide one main point of contact — an advocacy team supported by a digital app. That team helps employees connect to the right resource, whether it’s a condition-specific program, a center of excellence, or internal clinical support. This approach reduces confusion and makes benefits easier to use.
 

Integrating Medical and Pharmacy

Another strategy brings medical and pharmacy benefits together. When health plan and pharmacy services are closely connected, care providers and advocates can see a full picture of a person’s care — including prescriptions, doctor visits, and conditions.

That broader view helps identify gaps in care, prevent issues like duplicate prescriptions, and guide people toward appropriate treatments that cost less. It also allows employers to manage high-cost specialty drugs more effectively without adding complexity for employees. In a study of Elevance Health-affiliated health plan members with complex medical conditions, integrating medical and pharmacy benefits resulted in savings of more than $100 per member per month.

For employers and employees, lowering healthcare costs is not a one-time project. It requires ongoing attention and thoughtful design. By consolidating health plan providers, offering alternative plan options, evaluating point solutions more carefully, and integrating medical and pharmacy care, employers are changing how they provide coverage. Our affiliated health plans work with employers to tailor these strategies to their workforce, helping manage costs while keeping quality care the priority.

Frequently Asked Question

What are some of the ways employers manage rising healthcare costs?

Employers are managing rising healthcare costs by consolidating health plans, rethinking plan design, getting smarter about specific solutions for complex conditions, and integrating medical and pharmacy.