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37 ways to lower your health care costs



Average employer-paid health benefit costs have increased about 6% per year for the last five years. At least in the short term, the new health care reform law may make the problem even worse. All the more reason to act now to get your health care costs under control. Here are 37 strategies worth trying.

They’re grouped in seven broad categories: Plan Design, Financing, Care Management, Vendor Management, Consumerism, Pharmacy and Retiree Benefits.



1. Move away from co-payments, toward “co-insurance.” The insurer and the insured person share costs incurred after the deductible is met, according to a specific formula.

2. Tiered hospital coverage. Employees pay more to be treated at the best hospitals.

3. Salary-related contributions. Higher-paid employees pay higher deductibles, co-pays or premiums.

4. Benchmarking plan design. Compare your coverage against other organizations using surveys (Kaiser, Mercer, etc.).

5. Pharmacy carve-outs. Use separate vendor for pharmacy coverage to obtain the best prices.

6. Health savings accounts. Like a medical 401(k), helps employee become better health consumer.

7. Identify centers of excellence. Make clear to employees which hospitals are best at treating certain diseases.

8. Direct contracting. Contract directly with doctors and hospitals, rather than using a health-provider network (more very large corporations moving in this direction).



1. Defined contribution plan. Workers given set amount (say $5,000) to design a health plan with specified insurance company.

2. Opt-out incentives. Employees or dependents given financial incentives to opt out of the plan.

3. Employee cost sharing. Increase percentage of employee contribution paid toward premium cost. Most employers have taken this step, but may need to address the issue again.

4. Self-insured status. In past few years, self-insured plans have seen lower premium hikes.



1. Disease management. Use claims data to figure which diseases are driving your costs and try to identify those diseases earlier.

2. Case management. Focus on “train wreck” cases and make sure insurer manages their costs.

3. Health risk assessments. Employees do online wellness checks, earning them small rewards.

4. On-site medical services. Keeps employees out of ER and on the job. It’s mostly applicable to big firms.

5. Nurse-advice services. Telephone triage system offered by many insurance firms helps keep employees away from expensive ER trips.

6. Predictive models. Work with your insurance carrier mining health-claim data to spot employees with future problems (future “train wrecks”).



1. Claim audits. Look at accuracy of how insurance claims are paid.

2. Clinical audits. Look at accuracy of how insurance carrier is following its own care-management efforts (similar to an employee performance review).

3. Price negotiation. The bread-and-butter of cost savings. Don’t accept any number as final.

4. Performance guarantees. Tweak them often, constantly raise the bar.



1. Plan-selector tools. Web site where employees can plug in data, and site helps them choose right plan.

2. Personal health management tools. Send e-mail to employees that provides customized health tips. For example, employee begins receiving pregnancy-related health tips once she becomes pregnant.

3. Debit cards. For example, instead of a dental plan, give employee a debit card with $500 on it for dental costs.

4. Price/quality decision tools. Online tools that allow employees to identify the best quality doctors and hospitals.

5. Patient advocate services. Vendors (beyond the insurer) that offer services—such as telephone hotlines—to help employees make wise health decisions.



1. Tiered pharmacy coverage. Employees pay more to receive the most expensive drugs, less to receive generics.

2. Move from co-pay system to co-insurance. As cited in the “plan design” section, this would eliminate co-pays, requiring employees to share the incurred cost.

3. Generic incentives. Provide financial incentives for employees to buy generic medicines.

4. Mail-order incentives. Provide financial incentives for employees to buy medicine via mail order.

5. Deductible increase. Hike employee’s Rx deductible amount. 

6. Drug exclusions. Eliminate coverage for certain classes of prescriptions.



1. Drop post-65 plan. Eliminate retiree medical benefits for ex-employees once they reach 65 and are eligible for Medicare.

2. Drug-only plan for post-65 retirees. Switch to a prescription-only benefit for ex-employees once they reach 65 and are eligible for Medicare.

3. Reduce or eliminate co-payment subsidy. If you subsidize co-pays for retiree benefits, eliminate this subsidy or reduce it.

4. Eliminate future eligibility. Cut off eligibility for retiree benefit plan starting at a certain date.