- Employers should focus less on short-term fixes and think about sustainable options.
- Employee feedback and benefits utilisation data can determine where employers can create cost savings.
- Free add-ons to benefits, such as employee assistance programmes, can provide support at no extra cost.
UK private medical inflation has been higher than the European average for the last five years due to increases in demand for private healthcare services, pressure on public healthcare and higher levels of claims, according to Willis Towers Watson’s (WTW) November 2024 WTW Global medical trends survey. Indeed, last year costs were expected to increase by 12.6%. So, how can employers keep healthcare costs down?
1. Assess healthcare data
To effectively manage healthcare costs, employers must understand how employees utilise benefits, because this can enable them to target spending. Monitoring absence rates and creating a clear picture of absenteeism can highlight underlying health issues within the workforce, emphasise needed services and anticipate future cost increases. Additionally, employers can use absence data to identify trends and implement initiatives that proactively address issues within their workforce.
Improving employees’ health and wellbeing will not only manage healthcare benefits costs over time, but will also drive down the cost of risk benefits, occupational health, sick pay and retention rates, says Kazune Kozen, associate director of health and benefits at WTW.
“With the increasing demand and expectation among employees for additional support and benefits within the workplace, effective data use and understanding preferences are vital for developing a successful wellbeing strategy,” she says.
2. Design benefit strategies according to workforce profile
Rachel Western, health and risk principal at Aon, adds: “Employers should utilise benefit design to reduce spend, strategies to manage the cost of proving these benefits through different funding methodologies where appropriate, and tackle the underlying health conditions and behaviours that drive claims costs that directly impact premium.”
For example, employers can reduce private medical insurance claims by utilising pathways and standalone services, such as musculoskeletal support or cancer care. These provide targeted care for prevalent health issues, help limit claims and make future premiums more manageable.
Nick Clynes, partner at Barnett Waddingham, says: “By employing actuarial analysis to examine claims experience and membership characteristics, organisations can develop more accurate models that reflect their unique circumstances. This can impact on overall healthcare expenditure. By focusing on early intervention and preventative care, employers can reduce demand for more expensive treatments down the line.”
Riannon Palmer, managing director and founder of PR and communications agency Lem-uhn, adds: “Employers should ensure the healthcare support they introduce is what employees want, while also weighing up the cost implications to manage healthcare benefit costs in 2025. We’re a start-up with a lean budget and tried to find cost-effective ways to support improved employee wellbeing while delivering a good amount of benefits.”
3. Implement cost-effective benefits
Supporting employees with health management tools can be valuable in driving down spend. These can include training, awareness sessions and webinars, and health cash plans to provide cover for everyday healthcare needs, including optical and dental care, at an affordable price point. Some cash plans also come with additional benefits, such as access to wellbeing apps and online health resources.
“Employers can support staff without incurring significant costs by thoroughly understanding available healthcare provisions and value-added services provided by insurers, such as online GP consultations, employee assistance programmes, and mental health support,” says Clynes. “These are designed to address a range of employee needs and can be accessed at no additional cost. Making them simpler to locate can make a difference.”
A healthcare trust, which allows employers to self-fund healthcare benefits, can offer greater control over managing health costs through a cost-effective approach, with any surplus, including interest earned, remaining under the trustees’ control to be used for future claims.
Organisations could also offer health screening through a healthcare provider. This preventive initiative can help to identify potential health risks early, allowing employees to take proactive steps to mitigate these, and enable future healthcare cost savings. Additionally, employers can promote free preventative services offered by the NHS to reduce illness or diagnose conditions earlier, such as NHS bowel screening for those aged over 50 and NHS Get Active.
Beth Husted, associate director of health and benefits at WTW, says: “There are often non-costly [options], such as fitness challenges, replacing unhealthy snacks with free fruit in the office or encouraging the use of standing desks. Training line managers can be a cost-effective way of approaching health, along with DSE assessments, a bikes-for-work scheme, gym discounts and wellbeing apps.”
4. Clearly communicate available benefits
Clearly communicating benefits and support tools, as well as regular employee interaction, can also help to boost engagement. Employers should regularly review their methods to ensure employees are well-informed about available resources. This can include hosting internal sessions, distributing regular updates, or creating engaging digital content highlighting the benefits on offer.
“When looking at communication, try varying channels for different benefits where differing employee demographics may be more engaged, for example social media and technology may suit a younger aged employee demographic,” says Western. “Employers can look at reward-based benefits provision to add value to the offering, and a variety of tools, so employees can choose based on their needs.”
By fostering open communication, organisations can enhance the overall value of their healthcare provisions. Employee data and feedback are pivotal for designing communication and engagement campaigns that target specific groups. “Engaging employee resource groups, wellbeing champions and asking providers to support with promotion and engagement will ensure employers get the best value for money,” Kozen says.
Meanwhile, employers should leverage materials provided by insurers on intranet sites or in targeted wellbeing campaigns, so employees can easily access and utilise benefits information, adds Clynes.
By ensuring the available employee support is useful, valuable and effective, employers can work towards keeping healthcare costs down in 2025.
