American Business Needs Better Value In Health Care

American businesses are seeing their health care expenses climb at the steepest rate in decades. Private health insurance costs are expected to rise 7.6 percent this year alone – creating the potential for double digit increases in 2025. These increases have a more profound impact on budgets, given the fact that businesses continue to grapple with macroeconomic pressures and increasing demand for supplemental health services in an already complex labor market.

Businesses often shoulder health care price surges to avoid passing those costs onto their employees in the form of higher premiums. This has traditionally been considered a fair financial trade-off – as access to health care benefits is believed to maintain a healthier and more productive workforce. But there are limits, and C-suite executives are increasingly concerned about whether spending on traditional health insurance products translates to better outcomes for employees. Fragmentation in care and rising-out-pocket-costs often force employees to delay or forego treatment or services.

Addressing this imbalance between the cost of quality of care requires stronger engagement from the C-suite. Historically, it has been the role of financial chiefs to monitor health insurance expenses as a general business practice for P&L management. Yet with no signal of health care costs easing, there must be a more strategic focus on cost containment.

Prioritizing value

Businesses don’t have to accept the status quo when it comes to health care costs. Thankfully, research shows that the tide is slowly starting to turn here.

A recent Milken Institute survey of 72 large employers found that 38 percent are integrating value-based care strategies into their benefits today. In other words, they are ensuring that the providers within their insurance network are held financially responsible to meet certain population health metrics and cost benchmarks. Respondents noted that within these value-based arrangements, preventive and primary care were the two most important tenets – which both have been proven effective in improving patient health and reducing the overall cost of care. And equally important, these two areas create a clear opportunity to measure improvements in population health.

We believe this trend will further accelerate in the next few years – as an additional one-third of respondents indicated they are working to best understand what value-based strategies will work for them and their insured populations. This is a much-needed shift, but there must be a more concerted effort on the prioritization of affordability and quality of care.

Employers can (and should) lean into their purchasing power and influence to demand higher levels of value from their providers. The Milken Institute survey unveiled other key opportunities to achieve a better return on their health care spend.

Lowering the cost of care

It’s no surprise that reducing the cost of care is a key priority for employers, and they view it as a holistic issue. There was a notable emphasize on addressing the overall cost of care for employees – given that high premiums, deductibles and out-pocket costs often make coverage unaffordable for many.

Respondents also highlighted the importance of a broad network of providers and service options, reflecting a deeper commitment to accessibility. Employers can achieve that goal by building a targeted network comprised of care providers with a proven history of delivering high-quality, cost-effective care.

Reducing the mental health burden

Within employer-sponsored insurance, the need for mental health services continues to grow – and the severity is often disproportionate across race, sexual orientation and income level. Employers clearly recognize this burden, as over 20 percent of survey respondents indicated that they intend to enhance these resources in the next two to three years.

Additionally, mental health resources were offered by 63 percent of respondents through an Employee Assistance Program (EAP), with 36 percent offering caregiver support and resources. In a cost constrained environment, employers must invest in areas that have the most acute impact on the well-being their workforce, like mental health.

Business leaders can deploy a variety of tools to address the health care cost paradigm. Every insured population requires unique solutions – and no one employer will fix health care on their own. It’s incumbent on each of us of remain focused on value and openly discuss opportunities to improve.