You don’t have to be a big player to save on health costs
If you’re running a business of any size, rising health care costs are a problem. But when we look at
which businesses are taking creative steps to solve that problem, we find the biggest companies leading
the way, while many smaller and mid-sized business lag behind.
That’s unfortunate, because smaller companies actually have far more to gain by reining in health costs,
and they also have far more options than they realize.
What’s at stake? U.S. businesses spend nearly $700 billion a year on employee healthcare, covering
about half of all Americans, according to a recent Harvard Business Review report. And those costs are
currently rising by 7 to 10 percent a year, which means they’ll double in just the next seven years.
Big employers get it
Huge employers like Walmart, Boeing and Lowe’s are buying healthcare directly from providers, cutting
out commercial insurance companies and other needless bureaucracy. This helps keep costs down, but
perhaps more importantly, it can result in much higher quality care and healthier, happier employees.
Health care buyers are increasingly embracing bundled service agreements, which provide a steady
revenue stream to hospitals and clinics in exchange for fair prices. Some employers shop for care across
a wider geographic area. This could even include paying for an employee to travel out of state to receive
quality care at more appropriate prices.
Unfortunately, too many smaller companies mistakenly conclude that these great ideas are outside their
grasp. But it’s not always as complicated and expensive as finding the best back specialist in the world
and flying 100 people there. It could be as simple as finding a fairly priced MRI provider and asking
people to drive an extra five minutes. That works whether you have 25,000 employees or 300.
But little guys can save, too
Companies that aren’t big enough to self-insure, or to demand bulk discounts, can still join a captive like
Pareto or a coalition of employers to negotiate better results for their people.
And the cost savings for smaller businesses could drive much bigger business impact. A 20 percent
reduction in healthcare costs might not move the share price of a Fortune 500 member. But for a mid-
sized school system, that might equal 10 more teachers. At a mid-sized employer, it might let them
boost their R&D budget by 10 percent.
Someday we may achieve a perfect healthcare system, with low cost, high quality and far more
convenient access to care. But we won’t change the status quo by waiting on the sidelines. It takes more
than just shopping for copays and deductibles and crossing our fingers for the next 12 months.
It’s time to start thinking about getting a return on all that money we spend on health care. We should
be able to offer world-class benefits, which help to recruit great people and help them lead healthier,
more productive lives.