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How To Effectively Manage Your Healthcare Spend

As a business leader, you’ve been responding to the COVID-19 pandemic, the unusual working conditions, and ever-changing environment. You have implemented a variety of business continuity plans, modified internal processes, and procedures or maybe facing sourcing issues. But one thing seems to be consistent and that’s to save money heading into next year and beyond.

Take this opportunity to evaluate your benefits and related vendors. 

For years, we have seen medical and pharmacy price increases far outpace both inflation and the consumer price index (CPI). The industry continues to sell employers products that are complex and fragmented and on-trend reduction as savings, meaning spending equal or less on something will save you money. 

If a product is purchased to replace two or three other services that cost equal or less than what’s currently in place most employers would consider ‘this’ savings. But it’s actually an illusion - the savings is only on the potential trend increase. 

To identify a true cost reduction, the savings must lower the known costs, not just decrease trend. 

Real opportunities are needed to reduce the core costs of medical care and drive better value. Here are some ideas: 

The key to lowering your healthcare spend is in the little things.

Quality matters more than discounts. Paying $7,000 versus $7,300 for surgery may be cheaper but could cost more when a patient has complications, or a provider has to do the same surgery twice. How does your administrator evaluate the quality of providers in their managed care network and what do they do to direct patients to these higher-quality providers? 
Net cost versus discounts. A managed care network can easily show a bigger discount simply by allowing the provider to raise its price without increasing the reimbursement. 

Location, location, location. Where plan participants live and access healthcare services impact your benefits spend. Understand if benefits spend is increasing because of utilization patterns (i.e. ER vs. doctor’s office) or the cost of living in a region. Control the controllable by educating employees about cost-conscious strategies to receive quality care while minimizing costs. 

Encourage staff to share their needs and ideas, recognizing that 20 percent of our overall health is related to the clinical care we access and build a benefits program that meets their needs. Then communicate: remember targeted employee benefits messaging can reduce healthcare spend. 

Take the time to evaluate your current benefits plan and identify ways to make it even better from what has changed or you’ve learned. 

Focus on leading indicators. The diagnosis and categorization of claims listed on your reports from medical and pharmacy vendors (including diabetes, cancer, musculoskeletal (MSK), and obesity) are the health outcomes of the individuals on your benefit plan. Think about the leading indicators of these diagnoses and claims and take action to change their course. 

Review your top 1 percent of claimants. Your plan administrator can help you identify large claims and jumpstart programs to improve engagement and help reduce healthcare utilization.
Stop accepting the status quo. During the last three months, there’s been much disruption. Continue to disrupt and ask for simplicity and coordination. 

Create a healthcare strategic plan. Generate broad organizational agreement on where you want to be in three to five years and then build a road map on how your organization is going to get there. 

Want more information on how you can organically reduce employee benefits costs, visit or email [email protected]. Or join us for our upcoming webinar COVID-19: Digital Solutions for Employee Health happening Thursday, June 25 at 12 p.m. EST.


About Health Action Council
Health Action Council is a not-for-profit 501(c)(6) organization representing mid and large-size employers that enhances human and economic health through thought leadership, innovative services, and collaboration. It provides value to its members by facilitating projects that improve the quality and moderate the cost of healthcare purchased by its members for their employees, dependents, and retirees.
Health Action Council also collaborates with key stakeholders - health plans, physicians, hospitals, and the pharmaceutical industry - to improve the quality and efficiency of healthcare in the community.

Patty Starr bio image

About the author

Patty Starr

Patty Starr is president and CEO of Health Action Council and is responsible for driving the strategic direction of the organization--build stronger, healthier communities where business can thrive. 

Ready to take control of your employee healthcare & benefits costs?

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