Buying care smarter: Control rising health benefit costs

Health benefit costs for employers keep rising faster than wages and inflation, creating a shared challenge for organizations of all sizes. Overall medical spending is projected to grow at an average rate of 5.4% per year through 2031, making it more important than ever for employers to find smarter ways to manage expenses.

Employees are also contributing a meaningful share of coverage costs. According to the KFF Employer Health Benefits Survey, workers paid an average of 16% of premiums for single coverage and 26% for family coverage last year. As those contributions grow, employers are recognizing that long-term sustainability requires a more strategic approach—one that protects both the business and the people it employs.

Why buying care smarter matters now

Industry studies show that the price of care, not the amount of care people use, drives most of today’s medical cost growth.

Several interconnected forces are pushing costs higher. Prescription drug prices, particularly for specialty and GLP-1 medications, continue to outpace general inflation. Hospital consolidation has reduced competition in many markets, giving large health systems more leverage to negotiate higher rates with insurers. And as hospitals face their own rising operating costs, from workforce shortages to supply chain pressures, those increases are increasingly passed on to employers and their employees.

The result is a health care market where price and quality are rarely correlated, variation in what employers pay for the same service can be dramatic, and the traditional approach of simply passing more cost to employees is no longer a viable long-term strategy. For employers, the path forward is smart purchasing.

3 approaches to health care purchasing

Controlling health care costs isn’t just about cutting benefits—it’s about buying care smarter. Here are three strategies leading employers are using:

1. Leverage price transparency

Federal transparency rules now require hospitals and health plans to publish negotiated rates, including payer‑specific prices and full machine‑readable files. Last year, the Departments of HHS, Labor, and Treasury announced new steps to make transparency data easier to use. And as reported by KFF, the Centers for Medicare & Medicaid Services updated transparency rules, adding stronger requirements to improve public access to pricing information. For employers, this means more information and more power than ever before because price transparency lets employers find price outliers, high-value providers, and opportunities to negotiate smarter contracts.

Employers can take specific action by:

• Using transparency files to benchmark prices for common services
• Leveraging analytics to identify overpriced services
• Steering employees toward lower‑cost, high‑value providers

2. Move to site‑of‑care optimization to reduce unnecessary spend

Another proven way to cut costs is to move care to lower‑cost, high‑quality settings whenever possible. Many services that once required inpatient hospital care can now be done safely and cost effectively in outpatient centers or ambulatory surgery centers (ASCs). For example, in Merative’s 2025 analysis of preventive colonoscopies, costs varied widely across hospital, ASC, and office‑based settings, showing how site selection can significantly change total spending.

Employers can take several steps to capture these savings that can help lower costs without reducing access or quality. Partner with benefit advisors who can help:

• Design plans that reward employees for choosing ASCs and office‑based care
• Use transparency data to compare prices across different care settings
• Identify high‑cost providers and redirect care

3. Adhere to contracting discipline to rethink how to buy care

Hospitals continue to renegotiate contracts for higher reimbursement as they face inflation, workforce shortages, and rising operating costs. Larger health systems, in particular, benefit from strong negotiating power due to consolidation. To respond, employers can rethink how they contract for care to strengthen control and help reduce unnecessary spending.

• Consider self‑funding, when appropriate, to gain more transparency and flexibility
• Bid out health plans and pharmacy benefit managers (PBMs). PwC’s Health Research Institute (HRI) reports that employers are increasingly reassessing vendor ecosystems and network performance as medical costs rise.
• Adopt narrower networks and value‑based contracting. Specifically, PwC HRI finds that employers and health plans are focusing more on high‑performing networks and care‑steering strategies that direct patients to lower‑cost, higher‑quality providers and sites of care

How The Baldwin Group can help

Taking control of health care costs starts with having the right partner in your corner—one who brings data, strategy, and proven expertise to every decision. Here’s what that partnership with The Baldwin Group looks like:

• Advanced transparency‑driven analytics to identify cost‑saving opportunities
• Custom claims reviews to find high‑cost claimants, pharmacy drivers, and site‑of‑care opportunities
• Contracting expertise to support employer negotiation strategy
• Plan design support to steer employees to high‑value, lower‑cost care
• A focus on protecting both cost stability and employee access to quality care

Let’s work together to help your organization gain better control of rising health benefits costs.