Cost Containment: What is it & What are the Best Strategies

When you focus on expenses within an organization, health care is one of the highest costs for employers. cost containment is a term employers use frequently, but what does it mean? Before discussing strategies, we will first want to discuss what cost containment is.

what is cost containment?

Reading: What is cost containment in health insurance

Cost containment refers to the practice companies use to maintain the lowest possible spending levels for health care costs. a primary focus is placed on

  • carefully reduce unnecessary spending
  • prevention of unnecessary expenses
  • and focus on quality or care while reducing costs
  • Cost containment focuses on ways companies can reduce expenses, without compromising the level of care their employees receive.

    employers…why should they incorporate cost containment strategies?

    Costs in health care today are rising. The Centers for Medicare and Medicaid Services project that by 2027 the increase in spending will reach 5.5% per year. and, by 2020, large employers can expect an increase in expenses of 5 to 6%. This exceeds projected inflation rates in the United States. So, how do companies stay?

    45% of employers say controlling health care costs is imperative to their sustainability. the question is, what approaches can help reduce costs? the solution is to implement cost containment strategies! some strategies include

    1. transfer of costs from employer to employee
    2. harnessing the power of technology
    3. modify practices used by employers
    4. offer health plans with higher deductibles
    5. incorporate telemedicine and virtual care
    6. See also: Pre-existing Damage As A Basis For An Insurance Claim | Philadelphia Property Loss Claim Denial Lawyer

      Companies can also use claims analysis or choose to provide health savings accounts. changing coinsurance rules is another viable approach for some companies. Obviously, some strategies are more successful than others. By conducting an internal audit, organizations can better determine which approaches will be most successful.

      popular trends in cost containment

      As detailed in the examples above, some strategies are superior to others and some will work better for one employer than another. It is important for employers to consider all of these trends to determine which ones will benefit their organization. getting the trend right will allow employees to receive the same quality of care, without paying a big bill for employers in the process. So what trends should you consider?


      This form of treatment is one in which doctors/patients have a virtual visit. it is cheaper than office visits, but patients still have the benefit of individual consultations. visits are convenient and some doctors are available 24 hours a day, 7 days a week. In addition, patients receive the highest level of care, without leaving their home.

      Telemedicine is beneficial to employers because it is cheaper than office visits. This cost containment strategy helps avoid more expensive visits to the emergency room, primary care, or medical clinics. however, savings are only realized if employees embrace the transition to virtual care. If your employees aren’t using virtual services, this cost-containment strategy won’t save your business much.

      population health management

      This approach looks at both demographic and claims data. this information identifies chronic conditions such as heart disease, diabetes, and hypertension, among others. Case management strategies are then provided to employers to help combat the high costs of treating these conditions. this strategy is good for cost savings in medium to long term situations. a lot of work is required to compile the data. and, when the patient’s needs are complicated, it is even more difficult. patients must also be willing to cooperate, so cost savings can take years to realize and depend on employees’ willingness to cooperate.

      See also: What Does an Unemployment Claim Cost an Employer? | UIS

      price transparency

      Current health care is based on three parts/relationships that are

      • employer-employee
      • employer’s insurance carrier
      • powered by the employee insurance company
      • every relationship depends on the other two parties. negotiated rates and discounts also play a role in a couple of these relationships. when prices get complicated, these relationships become murky. Price transparency is due in part to the fact that insurance companies must negotiate individually with payment providers. the result is a system that is unable to manage its own costs. in turn, patients get confused and end up overpaying for treatment or care.

        As you can see, if cost containment is not properly controlled, neither approach will work.

        So what are the keys to successful cost containment?

        For cost containment to work, a couple of variables must come together. By focusing on employer-oriented strategies, employers must ensure that employees use the strategies in place. As the example above highlights, telemedicine is great; however, it is only beneficial if employees use it. utilization of services is critical for programs to work. Smoking cessation programs, health savings plans, and wellness programs only save employers money when employees use them.

        Employers must find ways to get employees to change their attitude about the benefits and programs offered. It’s hard, but working with employees to change their behaviors is the only way to really reap the benefits of cost containment strategies.

        a second main key is to find out what is working. according to the telacare health solutions 2019 report, about 79% of employers measure hdhps enrollment, while only 1/3 of these employers measure return on investment. Although ROI is hard to measure, it’s the only way to truly understand what works and what doesn’t. How else would your company justify accommodating different programs that might work better without understanding the return on investment?

        See also: Your Guide to the Life & Health Insurance Exam

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