How medical employers can better manage their rising health insurance costs

Peter Reilly: ©HUB International

When it comes to non-clinical management challenges, today’s medical practices struggle to balance the effects of continuing staffing shortages against intensifying financial pressures that, among other things, can hinder successful recruitment efforts.

Like other businesses, for example, they’re getting squeezed by rising operating costs. Medical supplies and necessary technology are among the expenses it’s hard to keep up with, especially as supply chains and pricing undergo significant disruption in a volatile political and economic environment.

As medical costs continue to rise, health insurance rates rise in tandem, and physician groups pay the price like everyone else. Pay is important for attracting and keeping both clinical and office professionals. But so are great benefits, and health insurance tops the list.

Several strategies can enable managers to gain better control over health benefit costs and give themselves a recruiting and retention advantage.

The drivers of health care costs

Anyone working in the health care environment is well-aware of factors leading to U.S. per person health expenditures of $13,432 in 2023, 50% more the average spent ($7,393) in comparable countries. Medical and general inflation have had significant effects, the former rising by 121.3% since 2000, versus an increase of 86.1% for all consumer goods and services.

Then, too, chronic medical conditions like cardiovascular and respiratory diseases are increasingly common. And there’s a price to be paid for health care’s chronic clinical personnel shortages.

But their impact pales next to the breathtaking price tags of new technologies and pharmaceuticals, like gene therapies, oncology drugs, and the GLP-1s, whose versatility makes them more in demand for weight loss than their original purpose of controlling diabetes. Then, too, high-cost specialty drugs are increasingly being used instead of existing but still-effective therapies. Together, these trends pushed prescription drug costs up 13.7% in 2023; an increase of 9.8% had been predicted.

No surprise: Employers across the board have been grappling with escalating health insurance costs as a result. Premiums for family coverage jumped 52% in the decade ending in 2024, reaching an average of $25,572. And employers paid an average of 75% of the total.

Four strategies to better manage health insurance costs

Medical practices are no different than any other small or mid-sized business when it comes to budget busters: Health insurance accounts for between between 30% and 40% of their total compensation costs.

One common cost-savings strategy has been to shift to high-deductible health plans, transferring more of the cost burden to employees. But it’s not an ideal solution during a worker shortage and, in fact, may discourage existing employees to short-change themselves on wellness for financial reasons.

A smarter approach is to take the long view with more sophisticated strategies for effectively navigating a difficult environment. Four of the best options include:

1. Dig deep into your health claims data. This information is now available to employers of every size. Experienced brokerage partners are key to leveraging this data in order to gain insights on health conditions that are driving costs, and what solutions will address them.
2. Pair analytics with clinical informatics. If data analytics uncover where health care costs are rising, clinical informatics tells you why and give you a path for fixing the issues. Between data analytics and clinical informatics, employers gain a critical edge for a plan that’s sustainable, affordable and efficient.
3. Ensure contract compliance. Undertaking such reviews for discrepancies and unmet financial guarantees is worth the investment. For one review of a pharmacy benefits manager contract, the reviewer found and renegotiated a poorly designed financial guarantee stipulation. The client received a $750,000 payout in the contract’s first year.
4. Consider alternatives. There’s more to health insurance than traditional plans—like self-funded plans and group captives, to name just two. These may reduce expenses and improve employee health outcomes. Your broker can walk you through what would work best for your organization.

The rollercoaster ride of today’s environment for health care costs may never even out. But with experienced partners can help employers smooth out the ride and create a benefits plan that is effective and sustainable for the long-term.

Pete Reilly is the practice leader and Chief Sales Officer of global insurance brokerage Hub International’s North American healthcare practice.In this role, he directs and coordinates HUB’s healthcare planning, growth and strategic initiatives. He also works with other leaders and experts within HUB to develop and introduce proprietary products that will help healthcare organizations and providers across the care delivery spectrum.