American business needs better value in health care

American businesses are seeing their health care spending rise at the fastest rate in decades. Private health insurance costs are expected to rise by 7.6 percent this year alone – creating the potential for double-digit growth in 2025. These increases have a deeper impact on the budget, given the fact that businesses continue to face macroeconomic pressures and the growing demand for additional health services in an already complex labor market.

Businesses often face rising health care prices to avoid passing those costs on to 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 whether spending on traditional health insurance products translates into better outcomes for employees. Fragmentation in care and increased out-of-pocket costs often force employees to delay or forego treatment or services.

Addressing this imbalance between cost and quality of care requires stronger commitment from the C-suite. Historically, it has been the role of CFOs to monitor health insurance spending as a general business practice for P&L management. However, with no sign of healthcare costs easing, there needs to be a more strategic focus on cost control.

Priority 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 providers within their insurance network are held financially accountable to meet certain population health metrics and cost standards. Respondents noted that within these value-based arrangements, preventive and primary care were the two most important principles – both of which have been proven effective in improving patient health and reducing the overall cost of care. And just as importantly, these two areas create a clear opportunity to measure improvements in population health.

We believe this trend will accelerate further in the coming years – as an additional third of respondents indicated they are working to better understand which value-based strategies will work for them and their insured population . This is a much-needed shift, but there needs to be a more concerted effort to prioritize affordability and quality of care.

Employers can (and should) rely on their purchasing power and leverage to demand higher levels of value from their providers. The Milken Institute survey revealed other key opportunities to achieve a better return on their health care spending.

Reducing the cost of care

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

Respondents also emphasized the importance of a broad network of providers and service options, reflecting a deeper commitment to accessibility. Employers can achieve this goal by building a targeted network of care providers with a proven track record of providing high-quality, cost-effective care.

Reducing the burden of mental health

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

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

Business leaders can use a number of tools to address the health care cost paradigm. Each insured population requires unique solutions – and no employer will fix health care on its own. It is incumbent upon each of us to stay focused on value and openly discuss opportunities to improve.