For most businesses, healthcare costs are the second-largest expense after payroll, yet many executives feel powerless to change the status quo. Every year, premiums rise, networks get narrower and employees bear more of the financial burden.
But business leaders who take control of their healthcare spending rather than relying on traditional insurance carriers can cut costs by as much as 50%, all while improving the healthcare experience for their employees.
The Four Primary Cost Drivers—And How to Cut Them
Businesses that actively manage their healthcare spend focus on four key cost drivers:
- Prescription Drugs
- Hospital Admissions
- Major Diagnostic Exams
- Surgeries
Each of these categories is burdened with unnecessary markups, middlemen and inefficiencies. The good news? By breaking free from traditional insurance networks, businesses can significantly reduce costs while improving the patient experience.
1. Smarter Prescription Drug Sourcing – Up to 80% Savings, or Even Free Medications
Prescription drug prices in the U.S. are artificially inflated, often by 400% or more due to hidden fees and profit-driven middlemen. Insurance carriers and their pharmacy benefit managers (PBMs) are structured to maximize profits — not lower costs for employers or employees.
How businesses are cutting drug costs:
- Partnering with fiduciary PBMs, which pass 100% of the savings back to employers, leading to 50–80% lower drug costs.
- Leveraging international and wholesale purchasing, which can reduce costs by up to 90% on name-brand medications.
Utilizing federal programs like the Patient Assistance Program (PAP), which provides many high-cost drugs for free to those who qualify. Many employees are eligible but unaware of these programs, and forward-thinking employers are integrating PAP enrollment into their benefits programs.
2. Reducing Unnecessary Hospital Admissions – Up to 40% Savings
Unnecessary hospital admissions are one of the biggest cost drivers in employer-sponsored healthcare. Most insurance plans do little to prevent hospitalizations, leading to avoidable emergency room visits, overnight stays and repeat admissions.
How businesses are cutting costs:
- Shifting to Direct Primary Care (DPC): One of the fastest-growing trends, DPC eliminates insurance barriers between doctors and patients, allowing employees to have longer, more frequent visits with their physicians. This proactive model keeps people healthier and out of the hospital.
- Implementing virtual and concierge primary care: Employers who offer 24/7 access to virtual primary care have seen up to 40% fewer hospital admissions — significantly lowering overall healthcare costs.
3. Slashing Diagnostic Exam Costs – Up to 90% Savings
Hospitals dramatically overcharge for diagnostic tests like MRIs, CT scans and lab work. Under traditional insurance networks:
- An MRI can cost $3,000 at a hospital but only $300 at an independent imaging center — a 90% savings.
- CT scans, X-rays and blood tests are similarly inflated under hospital-based billing structures.
How businesses are cutting costs:
- Contracting directly with independent imaging centers, where employers can access transparent, bundled pricing at a fraction of the cost.
- Steering employees to lower-cost providers, ensuring that tests are performed at facilities where pricing is fair and upfront.
4. Controlling Surgery Costs – Up to 60% Savings
Surgical procedures are among the biggest-ticket items in employer healthcare spending. Under traditional insurance plans:
- A knee replacement can cost $50,000 or more in a hospital.
- A spinal fusion surgery can range from $80,000 to $150,000, with wildly inconsistent pricing.
How businesses are cutting costs:
- Partnering with Centers of Excellence, which bundle pricing for surgeries, often reducing costs by 40–60% while improving quality outcomes.
- Negotiating direct contracts with high-quality surgeons rather than relying on insurance networks that inflate costs with hospital markups and administrative fees.
Looking Ahead
For more insights into transforming healthcare costs and improving patient experiences, tune in to The Broken Healthcare Podcast, where industry experts discuss innovative solutions for businesses navigating the evolving healthcare landscape.
Ray Kober, CEO of Benefixa, has more than two decades of experience and expertise in healthcare and employee benefits. His deep understanding and proficiency serve as the cornerstone of Benefixa’s employee benefits approach, placing the well-being of employees at the forefront of its strategy.
