21 Ways Employers Are Combating Escalating Health Care Costs in 2021

Over the next ten years, health care spending in the United States is projected to increase at an annual rate of 5.4%. In response to the cost escalation, plan sponsors in corporate, multiemployer and public employer environments are looking for ways to limit the growth of their health care expenditures while continuing to provide high-quality coverage to their participants.

The 2020 Employee Benefits Survey from the International Foundation of Employee Benefit Plans provides benchmarking data on the methods that health care plan sponsors are using to control escalating health care costs, including administration/data analysis, cost sharing, plan design and utilization control initiatives.

21 Ways Employers Are Combating Escalating Health Care Costs in 2021

Here is a look at each of these strategies to control health care costs.

Administration/Data Analysis Initiatives

Respondents use a number of administrative and data analysis initiatives to target growing costs.

  • Three in five (60%) of responding organizations conduct health care claims utilization analyses, which include any number of initiatives used to control costs and eliminate both the over- and underuse of health care services.
  • Slightly less than one-half (43%) conduct health care claims audits to examine health provider records to determine whether services provided were necessary, properly administered and correctly billed.
  • More than one in four (27%) respondents use predictive modeling, which uses data analysis techniques to forecast health care spending trends and determine the likelihood of future spending.
The Outlook for Health Care: 2021 and Beyond

Cost-Sharing Initiatives

  • Tiered cost-sharing plans are commonly offered among survey respondents. Tiered systems classify health care providers into tiers using a combination of cost and quality metrics. Participants pay a higher price to use the higher cost or less efficient providers in plan networks. Two-tiered cost-sharing arrangements are the most common (34%), but three (20%), four (19%), and even five or more (3%) tiers are also employed by responding organizations.

Plan Design/Program Initiatives

Survey respondents also incorporate several plan design initiatives to save costs and sustain coverage.

  • About two in five (37%) use dependent eligibility audits to verify the eligibility of dependents enrolled in health plans.
  • One in seven (14%) employs spousal surcharges, which reduce coverage available to a worker’s spouse if the spouse has coverage through their own employer. About 5% of responding organizations go a step further and institute spousal carve-outs, in which spouses with coverage elsewhere are denied coverage.
  • About one in eight (12%) responding organizations uses opt-out incentives, typically a lump sum or monthly payout offered by an employer to workers who decline participation in a health care plan.

Purchasing/Provider Initiatives

Initiatives aimed at the purchase point of health care also are becoming more prevalent among responding organizations.

  • Four in five respondents (80%) offer telemedicine services. Telemedicine refers to the use of technology to deliver health care services, usually for nonurgent situations or the management of chronic conditions. Other International Foundation studies have attributed this most recent increase to the COVID-19 pandemic, when in-person medical appointments may have been unavailable or participants sought to avoid them.
  • One in three (37%) responding organizations has access to centers of excellence, which are programs within health care institutions that supply high concentrations of resources to specific medical areas to achieve comprehensive and targeted outcomes.
  • A similar proportion (37%) provide price transparency or comparison tools, which allow plan participants to make more informed health care decisions.
  • More than one in four (25%) use health care advocates/navigators to help workers traverse the complicated health care system
  • More than one in seven (15%) plans contract directly with hospitals and doctors for health care services to obtain reduced prices. With direct contracting, employers may realize cost savings by bypassing insurers and other third parties.
  • A similar proportion (13%) are members of health care coalitions or purchasing groups. These groups use their enhanced purchasing power to obtain medical services at a significant cost savings and are the most common in the multiemployer sector.
  • bout one in twelve (8%) respondents offers narrow health networks, which establish smaller groups of providers that participants can use in exchange for paying lower premiums.

[Related Reading: 5 Ways 2020 Changed Employee Benefits]

Utilization Control Initiatives

Responding organizations continue to offer cost-saving initiatives aimed at controlling the utilization rate of health care services.

  • About seven in ten (67%) use case management, a care model that focuses on coordinating health care services needed by patients. These services can include checking for available benefits, negotiating provider fees, arranging for special services, coordinating referrals, coordinating claims among benefit plans and providing postcare follow-up.
  • About two in three (66%) plans use prior authorization/utilization management, which requires the participant to obtain authorization from a health plan or insurer for care prior to receiving the care.
  • More than three in five (61%) offer disease management initiatives, which are used to improve the health of participants with chronic conditions such as diabetes, cancer and heart disease.
  • About three in five (56%) responding organizations offer nurse advice lines that employ registered nurses to answer health care questions over the telephone.
  • More than one in three (36%) responding organizations offer education materials, such as medical self-care guides, directly to health care consumers.
  • About one in four (27%) responding organizations offers second-opinion services in their health plan. These services allow reviews of recommended medical procedures and allow organizations to look for more effective alternatives.
  • More than one in six (17%) have access to an onsite health care clinic, an offering more commonly found in larger organizations.


Which of these methods is your organization using to control the rise of health care costs in the coming months and years? What are some new strategies you want to look into implementing for the benefit of your plan and its members? Let us know in the comments below!

Download the full report: Employee Benefits Survey: 2020 Results.

Employee Benefits Survey 2020 Results

Justin Held, CEBS
Senior Research Analyst at the International Foundation 

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Justin Held, CEBS

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