How Employers Can Tackle Rising Healthcare Costs

Step One: Reclaim the Data

A fully insured health plan is a data monopoly. The carrier collects the premium, pools the risk, and keeps the granular claims data that would tell you which procedures, providers, and conditions are actually driving your cost. You cannot manage what you cannot measure. Self-funding breaks that monopoly.

According to the KFF 2025 survey, 67% of covered workers are now enrolled in self-funded plans, including 80% at large firms. The growth is accelerating downstream: EBRI research shows that self-insurance among mid-sized employers (100 to 499 employees) has risen from 25% to over 37% in the last two decades.

The financial case is direct. SHRM reports that employers using self-funded models save an average of 8% to 10% on overall healthcare costs by bypassing carrier profit margins and avoiding state-mandated premium taxes. Stop-loss insurance caps catastrophic risk. But the real value is strategic: self-funding unlocks the claims data required to see where the money goes and intervene with precision.

Step Two: Fix the First Touchpoint

With claims data in hand, the next structural move is changing how primary care is delivered. Direct Primary Care changes the unit economics of the first patient touchpoint. By moving to a flat monthly membership fee, operators remove the fee-for-service incentive that drives brief, high-volume consultations and unnecessary downstream referrals. The Society of Actuaries found this structural shift lowers overall claims by 19.9%, driven by a 40% reduction in ER visits and 25% fewer hospital admissions. A 2024 study in the Journal of General Internal Medicine confirmed the model’s financial viability at scale.

The model is already operating at enterprise scale. Industry data from 2025 shows 58% of all DPC memberships are now employer-sponsored, with 7,200 employers working with DPC practices and 85% retention at one year. DPC physicians spend 30 to 60 minutes per visit, catch chronic conditions early, and avert the expensive downstream events that drive the majority of claims cost. For a self-funded employer, that is not a wellness benefit. It is a claims reduction strategy with measurable ROI.

Step Three: Stop the Pharmacy Bleed

If primary care is where healthcare costs originate, pharmacy is where the margins are most aggressively extracted. Specialty drugs now account for over 50% of total employer prescription spending. Per-member-per-year specialty drug costs rose from $1,333 in 2023 to $1,641 in 2024. On top of that, 64% of large employers say GLP-1 drug coverage is now materially impacting their prescription spend.

Much of this cost is amplified by the pricing mechanics of traditional Pharmacy Benefit Managers. The FTC’s landmark 2024 report found that the three largest PBMs process nearly 80% of the 6.6 billion prescriptions dispensed by US pharmacies annually. Through vertical integration, spread pricing, and rebate retention, these three firms generated more than $7.3 billion in excess revenue from dispensing drugs above their actual acquisition costs between 2017 and 2022. The FTC found that many specialty generics were marked up by thousands of percent and preferentially routed to the PBMs’ own affiliated pharmacies.

The fix is not complicated. In a pass-through PBM model, the employer pays exactly what the PBM pays for the drug, plus a flat administrative fee, and 100% of manufacturer rebates flow back to the plan sponsor. No spread. No retained rebates. No financial incentive to steer patients to affiliated pharmacies. For a self-funded plan spending $3 million annually on pharmacy, eliminating spread pricing alone can recover six figures. And because you now have the claims data from Step One, you can verify every line item.

Step Four: Steer Patients to High-Value Care

With funding architecture and pharmacy economics restructured, the next leverage point is site-of-care routing. The price spread on commodity healthcare is massive. A hospital outpatient department charges $2,500 for a knee MRI. An independent imaging center three miles away, same equipment, same board-certified radiologists, charges $400. Peterson-KFF research confirms that when patients are shown price differences between MRI facilities, costs drop 18.7% per test and hospital-based utilization falls from 53% to 45%.

AI care navigation platforms are closing this gap at scale. Transcarent, which acquired Accolade for $621 million in 2025 to create a combined platform serving over 20 million members, use machine learning to ingest millions of historical claims, provider quality metrics, and real-time pricing data. Their WayFinding platform acts as a digital concierge, allowing employees to ask any health or benefits question and receive instant, contextual answers that steer them toward high-value care. A Forrester Total Economic Impact study found that AI-assisted care navigation delivered 210% ROI over three years, primarily by reducing unnecessary specialist visits and lowering overall medical claims costs.

By seamlessly integrating these insights into the employee experience, often incentivizing the right choice with a waived co-pay or reduced cost share, employers can save millions without restricting choice. The employee gets better information. The plan gets lower cost. The clinical outcome is the same or better.

Step Five: Prevent the Claims Before They Happen

The CDC reports that 90% of the nation’s $4.1 trillion in annual healthcare spending goes to people with chronic and mental health conditions. For self-funded employers, that concentration is both the problem and the opportunity: a small subset of the population, typically 5% to 8%, drives 50% or more of total claims cost. Legacy corporate wellness programs are a misallocation of capital. They distribute resources across healthy populations with zero measurable clinical ROI.

The modern playbook treats chronic disease like a risk-management exercise. By analyzing historical claims data, biometric screenings, and social determinants of health, predictive models identify the specific employees at highest risk of developing costly conditions like type 2 diabetes or cardiovascular disease within the next 12 to 24 months. Deloitte research shows that organizations using predictive modeling for population health have reduced hospital readmission rates by up to 20%.

Employers can then deploy targeted digital therapeutics and clinical interventions to these high-risk individuals before a chronic condition results in a hospitalization. Catching and managing pre-diabetes before it triggers a $50,000 cardiovascular event is one of the highest-ROI interventions available. And note the dependency chain: this only works if you control the claims data (Step One), which means self-funding is the prerequisite for everything downstream.

The Playbook: Six Moves in 12 Months

None of this requires inventing new technology. It requires sequencing existing tools in the right order, starting with the foundation and building up.

These are not six disconnected HR initiatives. They are a sequenced operating system. Self-funding unlocks the data. Transparent pharmacy contracts stop the most immediate financial bleed. AI navigation steers patients to high-value care for the procedures where price variation is largest. Targeted prevention addresses the root cause by catching chronic disease before it compounds into catastrophic claims. Each layer depends on and reinforces the one before it. The combined effect is a structurally lower cost base that persists, compounds, and shows up directly on the balance sheet. For operators and investors who are willing to treat benefits architecture as a system to be engineered rather than a line item to be absorbed, the opportunity is significant and the window is now.