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3 strategies to tip health benefit cost trend downward

Employer health benefits costs have reached a breaking point. Discover the 3 key strategies to tip the healthcare cost trend downward here.

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By Eric Parmenter

Employers’ health benefits costs have reached a breaking point. Healthcare costs continue to rise year over year, and the traditional levers that employers used to pull aren’t available anymore. Why? Healthcare expense already eats into wages and take-home pay, and, with low unemployment, the battle for talent is more intense than ever. We’re at a crossroads. We have to find effective strategies that manage total cost instead of moving it around.

In a recent article in The Journal of Financial Services Professionals, I identified three strategies I believe will help tip healthcare cost trend downward: tech-enabled benefits administration, referenced-based pricing (RBP) and direct contracting with providers. Here, I’ll cover the highlights of these three strategies.

Tech-enabled benefits administration

Employers have a coordination problem. Rather than spending their time on strategy and communication, they’re spending their days playing messenger between a dozen disparate vendors. And in addition to the valuable time and resources spent chasing down vendors, the member experience isn’t ideal—it’s fragmented, and your employees are getting information from disparate sources that may not be saying the same thing.

In order to innovate with your health benefits without a fragmented user experience and wasted team time, you need one platform to connect, run, engage, and optimize.

Direct contracting

Direct contracting is emerging as a go-to strategy for employers with large, self-funded employee health plans. In direct contracting, employers and health providers enter into an agreement between the two parties with no provider network as an intermediary. They set unit costs and agree on performance standards around cost, quality, and patient experience. Employers want to work more closely with providers to align incentives and create accountability, and direct contracting makes that possible

The challenge, however, is finding the right partner to bring all the essential components into a single platform that drives results.

Reference-based pricing

Reference-based pricing, or RBP, is growing in popularity. The concept is fairly straightforward: employers negotiate a price with healthcare providers based on Medicare rates rather than those negotiated by networks (which are often higher). Since RBP claims are not controlled by network contracts, though, claim denials can occur more frequently, leaving patients in the middle of billing disputes with hospitals and exposed to large bills due to the lack of agreed-upon contract terms. With medical bills responsible for half of the bankruptcy in the US, this is alarming.

However, when deployed correctly, RBP can augment an effective strategy—without leaving patients behind. Employers can strike the right balance between RBP and national networks—we do this at Collective Health by following the best practice of negotiating high-price out-of-network claims and passing the savings back to the plan, without taking a cut of the “savings.”


If your CFO is asking you why healthcare costs continue to rise year over year, then it’s time to think about new, long-term strategies to ensure your people are getting the best care from the right source at the best price.

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