The Employer Health Plan Cost-Control Playbook: Eight Levers, in the Order to Pull Them
Pull the levers that cost the least and disrupt employees the least first: a market check, your contribution strategy and plan design. Add pharmacy, funding and utilization levers once your claims show where the money goes. The right order depends on your group size and the data you can see.
Related: benefits program self-assessment and how to measure the return on benefits.
Three Levers You Can Pull Before Renewal
1. Check the Market
Compare your renewal with what other carriers and plan types would charge, and with peers of your size. It is the only lever that tests whether the increase itself is fair.
2. Reset Contributions
Decide how much of the premium you pay for employees and for dependents. Model each option before you announce one, because a small change repeats every year.
3. Redesign the Plan
Adjust deductibles, coinsurance and copays so employees keep the coverage they use. Pairing a higher deductible with an HSA can offset part of the change for employees.
Three Levers That Need Claims Data
4. Pharmacy
Prescription spend grows fastest in most groups. Review the pharmacy contract, rebate terms and high-cost drugs such as GLP-1s before the next renewal.
5. Funding Model
Level-funded and self-funded plans can pay less when claims are lower than the carrier’s rate assumes, and add risk when they are higher. Match the model to your risk tolerance.
6. Audit Claims and Eligibility
Check that the plan paid claims correctly and covers only eligible members. An audit can recover overpayments and remove ineligible dependents.
Two Levers That Change How Employees Use Care
7. Navigation and Utilization Management
Steer employees to lower-cost sites of care and manage large claims early with care management and prior authorization.
8. Vendor Strategy
Keep the programs that pass a need, use, results and fit test, and retire the rest. Fewer, better programs are easier for employees to find and use.
The Starting Point by Group Size
Under 50 Employees
Begin with the market check, contributions and plan design. Small groups have little claims history to analyze, so the market is the best evidence.
51 to 250 Employees
Add pharmacy and a funding model review once you can see a year or more of claims, and consider a claims audit.
250 or More Employees
Run all eight levers on a calendar, supported by claims analytics, and test vendor performance at every renewal.
Common Questions
Which cost-control lever saves the most?
It depends on your group. Contribution and plan design changes move cost fastest, while pharmacy and funding changes can move more but need claims data. Savings vary, so test each option on your numbers.
Will raising deductibles hurt employees?
It can. Model what a typical employee would pay in a normal year and a bad year before you change the plan, and explain the change early.
How often should I market the plan?
Review the market every year at renewal, and run a full bid when the increase is high or service has slipped.
Can a small employer use self-funding?
Some can through level-funded or captive arrangements. These add risk, so they suit employers who can absorb a bad claims year.
Where These Rules Come From
26 U.S.C. §223 (Health Savings Accounts)
26 U.S.C. §4980H (Employer Shared Responsibility)
CFH are licensed insurance brokers, not attorneys or tax advisors. This page is general information, so confirm your situation with your benefits attorney or tax advisor.
Related Guides
GLP-1 and Specialty Drug Cost Management
How employers manage the fastest-growing drug cost.
Free Employer Benefits Tools
Calculators for contributions, funding and renewal checks.
More guides on this topic.
Biosimilars: What Employers Should Know About Lower-Cost Biologic Drugs
A biosimilar is a biologic drug that the FDA has found highly similar to an already approved biologic, with no clinically meaningful differences.
Benefits in a Merger or Acquisition: What to Decide Before and After Close
Keep every employee covered on day one, and harmonize the plans at the next renewal rather than in a rush.
How Fast to Report Terminations to a Carrier
As soon as the date is firm. Each carrier sets its own deadline, and a late report costs more than a prompt one.
Does a Layoff Trigger COBRA?
Generally yes, if the employer is subject to COBRA and the layoff ends coverage.
Layoff Benefits Deadlines Calendar
A layoff starts several benefits deadlines at once. Here is the sequence, from separation date to year-end filings.
One Source of Records After a Layoff
Notices, terminations and billing should draw on the same records.
Right-Sizing the Group Health Plan
After a layoff, review plan design, contributions and funding for the group as it stands now, before the renewal.
Clean Termination Data After a Layoff
Payroll, enrollment and carrier records have to agree after a layoff.
Participation and Contributions After a Layoff
Carriers write participation and contribution minimums into the group contract.
ACA Counts and Reporting After a Layoff
ACA rules turn on counts of full-time employees. A reduction in force changes those counts, and the filings that depend on them.
Carrier Terminations After a Layoff
A layoff produces a list of names. Carriers need dates, coverage types and dependents tied to each one.
COBRA Notices After a Layoff
When a layoff ends health coverage, COBRA notices follow in a set order.
Organ Transplant Coverage in Employer Plans
Few employers face a transplant claim, but when one arrives it can dwarf the rest of the year’s claims.
Terminating a Group Health Plan: COBRA, Filings and Notices
When an employer ends its group health plan, the last claims still have to be paid, participants still have to be told, and the final filings still have to be made.
IBNR and Claims Reserves for Self-Funded Employers.
A self-funded plan owes claims for care that has already happened but has not yet been billed or paid.
Partially Self-Funded and Hybrid Health Plans.
Self-funding does not have to be all or nothing. Many employers fund one part of the plan themselves and insure the rest, or keep their risk low with a high stop-loss cushion.
Administrative Services Only (ASO): What It Is and What You Still Own.
In an ASO arrangement, the employer pays the claims and a carrier or administrator runs the plan: the network, claims processing and member service.
Health FSA Uniform Coverage Rule for Employers
A health FSA must make the employee’s full annual election available from day one.
McLarenNow Virtual Care and KSP Pharmacy
McLaren Health Advantage promotes McLarenNow Virtual Care visits and KSP Specialty Pharmacy on its member page.
Cigna Integrated Medical, Pharmacy, Behavioral
Cigna argues that keeping medical, pharmacy and behavioral benefits together reduces total medical cost.
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