Lowering Healthcare Costs: 5 Lessons from Benefits Leaders

Employer healthcare costs have been on an upward swing for years and 2027 will be no different, as experts expect them to jump 9.5%. With no end in sight, many employers are reviewing their current benefits, making plan design changes that would shift more cost to employees, or cutting back on benefits altogether because they feel like they have no other choice.

Yet employee benefits leaders who are moving the needle on costs know that addressing specialty care spend for surgery, cancer care and infusions is one of the most effective healthcare cost reduction strategies. Here, we explore what some of these leaders have learned after implementing specialty care benefits that focus on improving quality and outcomes, site-of-care optimization and one-on-one care navigation.

Lesson #1: Reduce Employer Healthcare Costs By Focusing on High-Value Categories

Employers have traditionally used broad healthcare cost-reduction strategies. Some include offering high-deductible plans, moving to self-insured plans, encouraging routine screenings and checkups, and making changes to their pharmacy benefits.

A relatively small number of healthcare events, however, drive a disproportionate share of employer healthcare spending, which traditional approaches fail to address. Cancer care, musculoskeletal surgery and other surgeries, and infusion therapy are all high-cost categories.

In fact, according to the Business Group on Health’s 2027 Employer Healthcare Strategy Survey, the top conditions driving healthcare costs are cancer (92%), MSK (68%) and cardiovascular (37%). Plus, infusion treatments and specialty care drugs account for more than $110 billion annually in the U.S., which is a significant cost driver for employers.

For some benefits leaders, focusing on high-value categories has emerged as a way to reduce spend. Take Integrity, an independent distributor of life and health insurance products. When the company became self-funded in 2023, they were looking to improve access to high-quality care for surgery.

“My biggest piece of advice would be to start with your people and the challenges that they’re facing and find the intersection with the business problem,” says Tabitha Pittman, Director of Compensation and Benefits at Integrity. “It was really an opportunity for us to take a deep look at the plan and our partners, where we could benefit from a financial standpoint and where our employees could benefit from a health outcomes and care standpoint. That’s what really led us to Lantern.”

Since launching Lantern, Integrity has helped its employees access higher-quality care, which has resulted in a 97% member satisfaction rating, along with 56.6% average savings compared to their carrier rates.

Lesson #2: Quality Is One of the Most Effective Healthcare Cost Reduction Strategies

Cost-reduction strategies are difficult to sustain if the care isn’t high-quality and doesn’t deliver better outcomes. A study in the The BMJ found that 38% of adults undergoing surgery experience adverse events and nearly 60% are potentially preventable.

The truth is that quality varies quite a bit, even from big-name hospitals. “It’s a complex problem to solve for, but having an overall strategy for addressing specialty care should start with quality and clinical appropriateness, and then cost savings will follow,” says Raymond Hwang, MD, Associate Chief Medical Officer at Lantern.

Employers save more when members receive the right care the first time. At Lantern, every provider accepted into the Network of Excellence goes through a rigorous vetting process that includes looking at performance, experience and outcomes, sub-specialization, board certification, fellowship training, procedure volume and appropriateness of care. Lantern also evaluates the facilities where the providers practice.

Navigating members to the highest-quality providers often costs less over time, too. “When you pull together a pool of highly curated, high-quality physicians, you have better outcomes,” says Jason Tibbels, MD, Chief Medical Officer at Lantern. “That means fewer complications, fewer readmissions, fewer hospitalizations and fewer unnecessary surgeries.”

For AT&T, adding more point solutions was becoming more difficult to manage, causing employee confusion and not delivering the ROI they expected. That’s when their benefits team shifted their “North Star” to quality. They knew they needed to focus on the top 5% of their population, which was driving nearly two-thirds of their costs. With Lantern’s Specialty Care Platform, members are guided to quality, clinically appropriate care and net hard-dollar savings.

“We’re trying to find the best care in the right setting at the right time,” says Ben Jackson, Vice President of Global Benefits at AT&T. “In times of headwinds, I think you need a North Star more than ever. Quality is the right North Star for us, and Lantern is a market leader because of their commitment to quality and that starts with having the right data, and the right experts.”

Lesson #3: Don’t Ignore Price Variation For Specialty Care Costs

Specialty care pricing can vary significantly. Consider some of these statistics:

• Within a given market, surgery prices may vary by more than 300%.
• Median price markups for cancer therapies across 61 NCI-designated cancer centers ranged from 118% to 633.6%.
• Costs for infusion therapies in hospital outpatient departments (HOPDs) are 40% higher than alternative sites of care such as ambulatory infusion centers (AICs) or the patient’s home.

To address price variability, employers are exploring specialty care benefits solutions that ensure cost savings. Independent Centers of Excellence, like Lantern, negotiate more competitive rates with surgeons and offer bundled payments. They evaluate quality at the surgeon level, not only at the facility level, ensure clinically appropriate care, and use Patient-Reported Outcome Measures (PROMs) data to understand how members feel after surgery.

As a licensed TPA, Lantern pays providers directly, allowing them to negotiate better rates. Site-of-care optimization strategies for surgery and infusion care, and a partner that can identify more cost-effective drug options, are also key to reducing costs.

For Amtrak, a site-of-care optimization strategy proved critical for reducing costs. Engaging with Lantern allowed them to have a solution that could steer members to high-quality, lower-cost care with a proven ROI.

“In this high unit cost environment, once you launch the solution, or next month, you have a very demonstrable return,” says Nathan Counts, VP of Total Rewards at Amtrak. “In this era, employers have become a little disillusioned with point solutions and are leaning toward more of these network strategies that can really impact the business and impact their members’ lives.”

Lesson #4: Lower Costs Without Shifting More Costs to Employees

Research shows that as healthcare costs rise, employers are shifting more costs to employees. According to a recent survey by Mercer, nearly half (48%) of large employers in the U.S. are seriously considering plan design changes such as raising deductibles or out-of-pocket maximums.

Not only do these approaches create friction with employees, but they’re not sustainable. Plus, shifting more costs to employees doesn’t address the underlying waste and costs associated with unnecessary procedures, misdiagnoses and preventable complications.

For Thermo Fisher Scientific, a life sciences and clinical research company, traditional approaches such as plan design, vendor negotiations and contract management had been their strategy to reduce employer healthcare costs. But with $40 million a year in surgeries, they knew they needed a new solution.

What resonated with their team when deciding on Lantern was the focus on quality care, better access, site-of-care optimization, and the savings methodology.

“We’re managing costs for the company and for our colleagues and we’re improving the quality of outcomes,” says Tom Oksanen, VP of Global Benefits and Mobility at Thermo Fisher Scientific. “It all came together, but it was led by a financial opportunity to manage our costs with a quality focus.”

Thermo Fisher Scientific also passes on cost savings by waiving all costs for employees on PPO plans and only collecting the IRS minimum for employees on a high-deductible health plan.

Lesson #5: Navigation Drives Healthcare Savings for Employers

Reducing employee healthcare costs through specialty care benefits only works when employees are engaged. At Lantern, a dedicated care team provides personalized guidance on provider selection and steers members to the right specialist according to the procedure and patient needs. Physician-led oversight ensures appropriateness of care and better outcomes.

For DICK’s Sporting Goods, Lantern’s cancer care navigation was important for their employees to receive education about their diagnosis, receive second opinions from NCI-designated centers and support their members throughout the journey.

“All of us know that going through a surgery, going through cancer, having to get infusions, whether it be for a limited time or a long time, are really complicated experiences,” says Tammy Fennessy, Senior Director of Benefits at DICK’s Sporting Goods. “Without having someone by your side, you can get lost in the weeds, make bad decisions, or frankly, not even get the care that you need.”

What Employers Lowering Healthcare Costs Do Differently

Traditional strategies for reducing healthcare costs are no longer enough. Employers must rethink their approaches and focus on quality and affordability.