Strategies to Reduce Healthcare Spending

Strategies to Reduce Healthcare Spending

Mary Jo Davis, Vice President of Product Management for Ceridian

Nov 6, 2014

Strategies to Reduce Healthcare Spending

 The healthcare industry as we know it is changing. With new compliance requirements and rising costs, organizations must proactively manage their healthcare and benefit expenses. Consider the realities of today’s healthcare world:

·         Three out of four CFOs report that healthcare costs are their most serious business concern.[1]

·         Organizations’ healthcare expenses are poised to jump by 6.8% in 2015.[2]

·         Wasteful healthcare spending is projected to reach $1.5 trillion in 2014.[3]

The statistics on rising healthcare expenses should concern every organization in the country. Since this perpetual increase in healthcare spending is not sustainable, companies need to start making changes now. We must look at healthcare spending in a way that we’ve never considered before and be prepared to take a revolutionary approach to solving this problem.

Are you ready to change how your organization views its healthcare costs? Let’s look at two simple healthcare strategies for reducing your organization’s expenses.

Strategy #1: Revise your Approach to Healthcare Cost Containment

If you are like most organizations, you have probably tried a few tactics to reduce your healthcare expenses. 1) You increased premiums or 2) You modified your plan options, including possibly moving to a consumer-directed healthcare strategy. The problem with these actions is that they are short-term solutions to a long-term problem.

The key to reducing costs is equipping employees to take ownership of their healthcare decisions. Since many employees are passive participants of their healthcare decisions, you must offer them tools and incentives to become better healthcare consumers. Empower employees by giving them ongoing education – both during open enrollment and year round – and encourage them to make smart health decisions, including eating right, exercising, not smoking and monitoring health numbers like blood pressure and BMI.

When employees do use their health benefits, make sure they have a vested interest in keeping costs down. The Affordable Care Act requires organizations to provide employees a Summary of Benefits and Coverage that outlines the organization’s contributions and employee costs for health plan options. Take your approach one step further by giving employees tools to compare and contrast the cost of treatment. Provide them incentives to shop around for treatment options by weighing price against the quality of care they receive.

 Strategy #2: Give your Wellness Program a Boost

With only 19 percent of employees using their company’s wellness program [4], it is evident that organizations need to change how they promote their wellness programs. These programs may contain all of the ingredients for success – health education, counselors and resources – but the “recipe” needs to be tweaked.

If you have a wellness program, you must shift from thinking about it as an expense to viewing it as an investment that will lower the company’s healthcare costs. Invest in your wellness program by creating a culture where participation is the norm. Once a healthy culture is developed, the next step is to encourage ongoing wellness activity and interaction.

When creating a wellness program strategy, don’t make the mistake of expecting every employee to participate. Instead, your job is to use incentives to convince the majority of employees to be part of the program. You can do this by offering wellness program participants a premium discount while charging nonparticipants higher premiums. Similar to assessing a surcharge to smokers, this strategy uses premium differentials to help fund the wellness program.

The formula for wellness success is simple: gain high wellness program participation – more than 50 percent – through the effective use of incentives and a comprehensive, but targeted, program. The more employees who participate in the wellness program, the healthier they will be and the lower your overall healthcare costs will be. While the formula is simple, putting it into action is made easier with the help of wellness experts.

Armed with these two simple strategies, your organization will be on its way to reducing healthcare expenses for the long haul. 

[1] Employee Benefit News

[2] PricewaterhouseCoopers’ Health Research Institute


[4] Wellness Manager 

About the Author: Mary Jo Davis has more than 25 years of experience in the benefits industry, specifically in developing and launching COBRA and FSA administration programs. Mary Jo joined Ceridian HCM in 2004 and currently is responsible for the management, development and growth of Ceridian’s Benefits Portfolio and LifeWorks Solutions.