Benefits and Compensation

Benefit Expense Reduction: Reducing Healthcare Costs

Traditionally, employers reduced healthcare spending by passing along more of the premiums and other costs to employees. This, of course, is still an option, but it’s obviously one that employees don’t favor and will not go far in making the benefits package attractive. It also doesn’t address the root issue of cost reduction but rather simply shifts the burden.


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Instead, many employers are looking at ways to actually reduce healthcare costs. They’re doing so primarily through finding ways to offer more affordable options and by encouraging employees to improve or maintain their health. Here are some examples:

  • Implement employee wellness initiatives to improve overall employee health and well-being.
  • Consider paying for international medical care. In some instances, the cost of sending an employee to an international destination and paying full price for a procedure is less than the cost of the same procedure in the United States. This is particularly useful for employers that are self-insured and thus are paying the full medical costs rather than just insurance premiums.
  • Offer smoking-cessation assistance to employees.
  • Offer a health insurance option with a health savings account (HSA). An HSA allows employees to pay for some medical expenses on a pretax basis, which means tax savings all around. It also means, for those employees who opt to enroll in that plan, that premiums are often lower—which, in turn, means the employer-covered portion of those premiums will likely be lower.
  • Offer additional plans, including high-deductible options. Although these may not appeal to everyone, they typically offer lower premiums.
  • Provide information for employees about where to seek medical help in different scenarios. Simply giving employees options—especially options that avoid an ER when possible and appropriate—can save money for everyone.
  • Encourage preventive care. Consider offering on-site clinics for things like blood pressure and diabetes screening or on-site flu shots.
  • Offer ways for employees to stay healthy. For example, offer discounted or free gym memberships, on-site fitness facilities, healthy food options on-site, healthy vending machine options, etc.
  • Consider offering a plan that includes telemedicine. Offering telemedicine is a way to remove a barrier to employees’ utilizing healthcare and talking to healthcare professionals, which can help them stay healthier.
  • Consider changing to plans that are priced per person rather than individual or family plans. This can better align the costs with the actual number of people covered and reduce costs for those who were paying for more than they needed.
  • Consider limiting spouse and family coverage to only those who do not have alternative coverage options. For example, if the spouse has his or her own employer-sponsored coverage, he or she would not be eligible to be on your plan. (Note: This may not be popular with employees.)
  • Offer more information to help employees make informed decisions. For example, give them information on where to find the best prices on their prescriptions. Simply having the information can influence their actions.
  • Keep comparison shopping for more affordable yet comparable coverage alternatives.
  • Consider offering a healthcare concierge—someone to assist employees in making decisions and who can guide them to cost-effective options when appropriate.
  • Offer online or app tools to help employees understand costs before undergoing any healthcare procedure. Awareness helps them make informed decisions.

What steps has your organization taken to reduce overall healthcare spending? What would you add to this list?

Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.