Jason Steenwyk is a Former FORTUNE Group reporter with 20+ years covering finance, healthcare, and the evolving world of work.

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Employee healthcare costs are getting downright ugly.

According to the Business Group on Health, employers expect healthcare costs to rise by about 9% next year—nearly four times the current inflation rate (2.9% as of August 2025).

These relentlessly rising costs make American companies less competitive. They divert resources needed for business investment and expansion, limit meaningful pay raises, and ultimately reduce opportunities for everyone.

As HR professionals, we can’t sit passively on the sidelines. We need to be proactive. It’s our responsibility to grab the bull by the horns and wrestle those increasing healthcare costs down to a more manageable, sustainable level.

Otherwise, healthcare expenses will continue to consume more resources, choking business growth, wage growth, and job opportunities.

The good news: HR teams can make a real difference. With smart benefits design, the Business Group on Health estimates employers can reduce that 9% growth rate to about 7.6%.

Yes, 7.6% is still high—but it’s far more manageable. And if you succeed, you’ll save your company significant money that can be put to more productive uses.

Here are four key strategies HR leaders can use to meaningfully reduce employee healthcare costs.

The Pareto Principle, or 80/20 rule, states that roughly 80% of outcomes come from 20% of causes, and it applies perfectly to healthcare spending.

In many plans, just 5% of members drive about 50% of total costs. By improving outcomes and cost-effectiveness for this small group, you can make a major dent in overall utilization.

Start by identifying the specific conditions generating the highest claims. These usually include:

• Cancer
• Musculoskeletal conditions
• Diabetes
• Obesity-related conditions and GLP-1 medication use
• Mental health

For Fully Insured Plans

If your company uses a group health insurance carrier (e.g., Aetna, BCBS/Anthem, etc.), request a claims experience report showing your top claims by both cost and frequency.

For Self-Insured or Level-Funded Plans

If you’re self-insured or level-funded, ask your third-party administrator (TPA) for a cost lever analysis, which is a detailed breakdown of total medical and pharmacy spending by condition, service category, and provider type.

Also request a benchmark analysis comparing your top cost drivers against similar employers, and schedule a data review meeting to discuss trends, drivers, and your TPA’s recommendations.

Tip: Artificial intelligence has made benefits analytics far more powerful and affordable. Vendors like Milliman Solutions, Arcadia.io, or even your own TPA can help create cost lever dashboards. Use these to brief company leaders and guide smarter decision-making.

Until recently, healthcare pricing was a black box—hospitals and clinics often charged wildly different amounts for the same procedures.

Thanks to Hospital Price Transparency (HPT) and Transparency in Coverage (TiC) regulations, hospitals must now publish pricing for each procedure or service on their websites.

This transparency makes it much easier to compare local pricing.

Of course, price isn’t everything. But if your plan consistently pays above-market rates for common procedures like MRIs, joint replacements, spine surgeries, or cancer treatments, it’s worth investigating.

Ask your TPA for quality of care data—complication rates, 30-day readmission rates, or imaging quality metrics—to identify outliers.

When you find providers that charge significantly more without offering better outcomes, you can renegotiate or steer employees toward providers that deliver superior value.

Case in point: Pacific Steel & Recycling cut its healthcare costs by nearly 50% through a combination of price transparency and strategic provider partnerships.

Once you’ve identified hospitals or clinics that consistently provide the best value, consider implementing a Center of Excellence (CoE) benefit.

With a CoE program, your plan contracts with top-tier providers (e.g., the Mayo Clinic, Cleveland Clinic) that specialize in high-cost, high-frequency conditions affecting your workforce.

In exchange for a steady stream of referrals, the CoE offers favorable pricing and coordinated care.

Some companies even waive copays or coinsurance for employees who use CoE facilities, and cover travel expenses for patients and their caregivers.

A RAND study found that implementing CoE programs reduced costs by an average of $4,229 per case—a 10.7% savings. Employers and employees both benefit from lower complication and readmission rates, as well as reduced absenteeism and presenteeism.

Example: Walmart’s CoE program covers cancer, bariatric surgery, heart surgery, and joint replacements. About 10% of large employers now offer similar programs, including behavioral health CoEs, according to KFF.

You can’t implement a CoE for every condition, but focusing on your biggest cost drivers can deliver significant returns.

It’s not just employers feeling the squeeze of rising healthcare costs. Employees are feeling it too.

According to Mercer, 59% of employers plan to reduce benefits next year, shifting more costs onto workers. As deductibles, coinsurance, and copays rise, many employees simply can’t afford care.

42% of Americans lack an emergency fund.

36% say they skipped needed care in the past year because of cost.

Delayed care often leads to absenteeism, presenteeism, higher stress, and preventable hospitalizations, all of which drive costs even higher.

Health Savings Accounts (HSAs) are great, but only for those who can afford to fund them. Many lower-income workers can’t.

That’s where voluntary benefits come in. By offering affordable, tax-free options through a Section 125 “cafeteria plan,” you can remove financial barriers that keep employees from seeking care.

These plans typically cost employers little or nothing, and employees can pay via payroll deduction.

• Popular voluntary benefits include:
• Hospital indemnity insurance
• Accident insurance
• Critical illness insurance
• Short-term disability insurance

These benefits help employees access care early, reducing the risk of serious illness and extended absences.

If your company already offers voluntary benefits, consider a communications campaign to boost awareness and enrollment especially among lower-wage workers.

As HR professionals, we can’t control inflation or national healthcare trends. But we can take proactive steps to manage costs and protect both our companies and our employees.

We don’t have to be passive administrators. By leveraging data, transparency, high-value partnerships, and voluntary benefits, HR teams can help bend the cost curve—without cutting the benefits employees rely on.

Open enrollment for 2026 insurance plans sold on the Affordable Care Act marketplace starts Saturday November 1. If Congress doesn’t extend the subsidies, the average monthly premium is expected to double.

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The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.