Organizational Wellness

How to Reduce Healthcare Cost: Five Tips for Employers

Sep 5, 2016
Last Updated Jan 11, 2024

The U.S. healthcare system is one of the most expensive in the world. Our per-person spending is nearly double that of other developed countries — and a lot of these high costs are shouldered by businesses. 

Nothing about this is expected to change anytime soon. In fact, things are only set to get more expensive.

Annual healthcare premiums this year reached an average of about $8,435 for a single employee, up from $7,739 in 2021. In that same time, a family plan jumped from $22,221 a year to nearly $24,000. With medical inflation over 8%, companies are bracing for the largest increase in healthcare costs in a decade next year.

This is stressful for any C-suite leader staring at their balance sheetEmployee health and wellbeing is foundational to any business, but steep increases year over year are increasingly difficult to accommodate.

There are ways to decrease your healthcare spending without sacrificing workforce wellness. Consider these five strategies as you look for ways to ease the pressure on your bottom line.

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Healthcare Cost Reduction Strategies

There’s no need for rising costs to catch you unaware. Planning ahead by deploying cost-reduction techniques can help you reduce your spending over time.

  1. Prioritize Prevention

An ounce of prevention is worth a pound of cure — and prevention costs a whole lot less, making it a major boon for employers looking to reduce healthcare costs. 

Many health insurance plans include full coverage for yearly physicals and similar non-treatment services. That’s a great start on preventative treatment! But having a doctor go through your vitals every 12 months isn’t a comprehensive approach to maintaining good health. Instead, the most effective employer healthcare packages include workplace health and wellness programsEmployee wellbeing programs reduce healthcare costs by supporting the ongoing health of employees so they do not need to make a claim. And many of these programs can be run at low or no cost to employers when they utilize wellness dollars, which are funds healthcare insurers set aside to help companies pay for qualifying wellbeing programs. 

These initiatives can improve employee health in a variety of ways, including improving activity levels, mental wellbeing, sleep, and nutrition. 

Activity

Wellness programs can increase activity levels, which helps to significantly reduce the incidence (and the associated treatment costs) of disease. The costs of inactivity are staggering: the global cost of treating new cases of preventable non-communicable diseases will reach US$ 300 billion by 2030, according to the World Health Organization. 

There are many programs employers can offer that help employees get up and move, from personal trainers to digital exercise courses. And gym subscriptions allow for customized physical activity plans in a fast and customizable manner, in line with the available budget. 

Learn More: How To Lower Corporate Healthcare Costs By Boosting The Physical Activity Of Employees

Mental Wellness

Emotional support can play a major role in creating a healthy workplace. Mental health conditions — from depression to anxiety to Alzheimer's — are costly and make it difficult for employees to work effectively. Spending on mental health conditions increased by 50% during the pandemic, and spending remains 39% above pre–pandemic levels. Wellbeing programs can help employees manage their emotional health with tools like yoga classes and meditation apps.

Learn More: How Mental Wellbeing Programs Reduce Corporate Healthcare Costs

Sleep

Good health starts with a good night’s sleep. Even one night of poor sleep can be problematic, destabilizing mood and increasing the chance of causing an accident on the road or in the workplace. Insufficient sleep over time is linked to a wide variety of major health issues, from depression to obesity. Offering a wellbeing program that incorporates tools like meditation and sleep trackers can help employees get the Zs they need to protect their health. 

Learn More: How to Reduce Corporate Healthcare Costs By Helping Employees Get Better Sleep

Nutrition

A healthy diet is foundational to a healthy life. Clean eating can help elongate people’s healthspan and lifespan. On the other hand, a poor quality diet over time can cause a host of costly health conditions, including obesity, type 2 diabetes, and heart disease. Wellness programs can help employees form and maintain healthy eating habits through services like nutritionists and nutrition tracking apps. 

Learn More: How Improving Employee Nutrition Can Lower Corporate Healthcare Costs

 

A holistic wellbeing program can drive a notable decrease in healthcare spending. In one study of more than 17,000 employees with access to Gympass’ wellness platform, healthcare spending for frequent users dropped by as much as 35% in just one year. As a holistic program, Gympass provides members with access to thousands of wellness resources. These support emotional and physical wellbeing, from sleep apps and nutrition trackers to guided meditations and fitness classes. This well-rounded approach to wellness helps improve overall health, driving down the need for expensive healthcare interventions. 

  1. Optimize Your Approach to Planning

Anyone who’s ever tried to submit an insurance claim knows healthcare is a complex affair. A 2020 survey of healthcare consumers found that not a single aspect of managing their own healthcare is considered ‘effortless,’ and over half (53%) of survey respondents have avoided seeking care due to the perceived difficulty in finding, accessing, and paying for it. 

When handling one claim is a headache, orchestrating an entire workforce’s worth of health insurance can get convoluted quickly.

This is why effective (and cost-effective) employee healthcare starts with effective management and planning. First and foremost, you will need to define two essential areas: Your objectives and your budget. These factors will help establish the parameters of your healthcare solutions, giving you an overview of employee and employer needs. This lets you know when you’ve found something that fits both sets of requirements. 

Next, conduct a needs assessment to determine the form your benefits should take and what specific benefits you should include. If you already have an existing benefits plan, part of the needs assessment is a review to see which benefits your employees are actually using and which ones aren’t being touched. 

Bring all of this information together to design and roll out the benefits package. Be sure to communicate the benefits to your employees in clear terms so they fully understand what’s covered in their policies and feel confident enough to use them. Periodically review and evaluate your program against the organizations’ and employees’ needs, and make any changes where necessary. 

Taking a deliberate and data-backed approach to healthcare planning can help your business dial in on the benefits that matter most without paying for features that go unused.

  1. Encourage Lower-Cost Services

Lower cost doesn’t mean less effective. Take, for example, telehealth care. Telehealth, virtual therapy, and other lower-cost services are convenient, encouraging employees to use them more often and take a more active role in maintaining their health. They’re also less costly to employers. 

The COVID-19 pandemic and the resulting lockdown order made it difficult and dangerous for patients to visit their healthcare providers in person. In response, many providers began offering telehealth services — allowing patients to meet with doctors and other health professionals remotely via online conferencing. Several years later, telehealth remains a staple of many healthcare plans. It provides on-demand care at a fraction of the cost of traditional in-person visits; remote consultations cost around $50, while an in-person visit can cost more than $170.

Connecting employees with access to this kind of affordable services often leads to an increased likelihood of them opting for high-deductible plans that include a health savings account (HSA) that come with lower costs. This, in turn, results in reduced premiums for fully insured employers and decreased claims expenses for self-insured and level-funded employers. That’s what a win-win situation looks like in healthcare.

  1. Choose the Copayment Method

You can also consider spreading costs by using copays. Copayments make it possible for employers and employees to share in the responsibility of paying for doctor visits, tests, procedures, and other medically-relevant expenses. These payments are made at the time the service is provided and are usually relatively affordable — the average cost of a copayment is $25 for a standard doctor’s visit and $42 for a specialty visit.

By cost sharing in this area, employers can negotiate lower premiums with their insurance providers. Often, these copays can even be put towards annual deductibles.

That said, you need to be careful when shifting too much of the cost to the people who are supposed to be benefitting. Copayments are widely used and generally accepted by employees as a natural part of employer-sponsored healthcare benefits, but pushing too much of the costs to your employees could decrease employee satisfaction. It may even impact your employee retention if competing companies offer a more lucrative benefits package. On the other hand, when used appropriately, copayments make it possible to maintain healthcare coverage and quality without increasing expenditures.

  1. Negotiate with Your Healthcare Service Provider

Although your Healthcare Service Provider may quote you prices, it’s good to remember that  insurance solutions are negotiable. After all, insurance companies want to turn a profit, and they can’t do that unless they can act competitively when bringing in new policies. They want your business. They need your business. And in many cases, they’ll fight for your business at the negotiating table. 

The more employees you have, the more bargaining power you might have during negotiations. Providers may be more willing to offer competitive rates and benefits if they know they can gain a significant number of customers. 

You can focus on the best value over simply the cheapest option. Make sure to evaluate the overall quality of care provided, access to specialists and hospitals, and additional services offered. Consider negotiating for flexibility in plan design, allowing you to tailor healthcare benefits to meet the specific needs of your workforce. Remember to ensure that any negotiated contract aligns with legal and regulatory requirements to avoid potential issues in the future. 

If both you and your provider are serious about finding common ground, it should be possible to agree on terms that will maintain the quality of the service without harming the parties involved (employee or employer). And if the provider does not want to negotiate, then consider returning to the market to see if other, more-amiable options are available.

Cut Your Healthcare Costs by a More Than a Third

Workforce wellness is a primary determinant of a company’s healthcare costs. Supporting the health of your staff with an employee wellbeing program can directly impact your healthcare spending — three out of four of HR leaders report their wellness program reduces the cost of providing healthcare benefits.

In a study of more than 19,000 employees, Gympass clients saw their healthcare costs reduce by up to 35%. These are significant savings, especially as the cost of providing healthcare to employees in the U.S. is anticipated to rise more than 6% year over year.

Speak with a Gympass wellbeing specialist today to discuss how we can help you reduce your healthcare costs.

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Gympass Editorial Team

The Gympass Editorial Team empowers HR leaders to support worker wellbeing. Our original research, trend analyses, and helpful how-tos provide the tools they need to improve workforce wellness in today's fast-shifting professional landscape.


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