The Hidden Costs in Your Health Plan: How Employers Can Eliminate Waste and Improve Outcomes

Employers are entering another plan year facing the same painful reality: healthcare costs keep rising faster than revenue, and traditional tactics are no longer enough to keep plans sustainable.  At the same time, employees are not necessarily getting healthier or more satisfied with their benefits. That disconnect is exactly where “waste” lives in your healthcare spend.

Employers can reduce healthcare costs by using claims and pharmacy data to identify wasteful spend, steering members to high-value providers, tightening pharmacy benefit design, and investing in population health, care navigation, and social determinants of health strategies that improve outcomes and reduce avoidable utilization. 

Below, we unpack what is driving costs, where waste hides in your plan, and the practical steps employers can take now to break the cycle. 

Rising Healthcare Costs: What Is Really Driving the Increase?

For most employers, healthcare has become one of the fastest-growing and least predictable line items in the budget. Several forces are behind this trend: 

• General inflation and labor pressures that increase the cost to deliver care.
• Ongoing labor shortages, especially among nurses and frontline staff, pushing systems to raise wages.
• Consolidation of hospital systems and carriers, reducing competition and driving up contracted rates.
• A lack of price and billing transparency that allows egregious charges and predatory billing to persist.
• Rapid growth in high-cost therapies, especially specialty drugs and newer diabetes medications.

Pharmacy in particular has shifted from a “footnote” in total medical spend to a major driver. In many employer plans, pharmacy now represents 25–50% of total healthcare costs, with specialty drugs and diabetes medications accounting for a large share of the increase. 

Yet despite this continued investment, the question remains: are people actually healthier? 

More Spend, Worse Outcomes: Why Health Is Not Improving 

When we compare the United States to other developed countries on key health indicators, the story is not positive. Despite higher spending, the US lags on: 

• Avoidable deaths
• Maternal and infant mortality 
• Suicide rates
• Overall life expectancy 

In other words, more spending is not translating into better outcomes. 

From a population health perspective, a few themes stand out: 

• Lifestyle and behavior still matter: physical activity, nutrition, tobacco use, sleep, and medication adherence continue to influence risk.
• Mental health and financial stress are tightly linked to physical health and healthcare utilization.
• Social determinants of health, where people live, work, and play, can drive up to 80% of health outcomes. 

On top of that, how people use the system contributes significantly to waste and cost: 

• Overuse of care: receiving unnecessary tests, procedures, or brand-name medications when lower-cost, clinically equivalent options exist.
• Underuse of care: skipping preventive visits, screenings, or medications due to access or cost barriers.
• Misuse of care: receiving care in the wrong setting (for example, the emergency room instead of urgent care) or at a higher-cost facility when a lower-cost, high-quality alternative is available. 

The good news: every one of these patterns represents an opportunity for employers to intervene. 

Where Waste Hides in Pharmacy Benefits 

The pharmacy ecosystem is a powerful engine for both innovation and waste. Misaligned incentives, limited transparency, and consolidation among pharmacy benefit managers (PBMs) often result in: 

• Higher prices for the same medication.
• Utilization of expensive medications where lower-cost, clinically effective alternatives are available.
• Prior authorization programs that lack comprehensive management tactics.

For example: A common diabetes medication like metformin may be available as an extended-release generic at a low cost, yet certain formulations with minor delivery changes can be billed at dramatically higher prices with no added clinical value. 

Members often only see a small co-pay at the pharmacy counter. The plan picks up the rest, and those hidden costs eventually show up in renewal increases, cost shifting to employees, or benefit reductions.

Employers that want to “cancel the waste” in pharmacy spend should focus on: 

• Using detailed claims data to identify high-cost, low-value medications.
• Replacing them with clinically equivalent, lower-cost alternatives.
• Evaluating PBM contracts, prior authorization criteria, and specialty cost containment programs.
• Leveraging preventive drug lists and manufacturer assistance where appropriate to improve adherence.

The goal is not just to cut costs, but to protect members clinically while eliminating wasteful spend. 

Population Health Strategies That Actually Bend the Cost Curve 

True cost containment requires more than chasing discounts. It requires changing how, where, and when employees use healthcare. Key levers include: 

1. Prevention and early detection - Encouraging appropriate screenings (like colonoscopies and mammograms), regular primary care visits, and early intervention for chronic conditions can prevent catastrophic events later. However, employers should be thoughtful about: 
   • Place of service (hospital outpatient vs. ambulatory surgery center). 
   • The potential for unnecessary follow-up testing and referrals. 
   • Balancing early detection with smart utilization and education. 
2. Chronic condition management- Conditions like diabetes, hypertension, and chronic kidney disease drive a disproportionate share of claims. Well-designed programs can:
   • Improve medication adherence. 
   • Support lifestyle change and nutrition. 
   • Reduce complications that lead to hospitalization or high-cost procedures. 
3. Care navigation and health advocacy -The healthcare system is complex. Employees often need help: 
   • Finding high-quality, lower-cost providers. 
   • Understanding coverage and appeals processes. 
   • Navigating denials or complex treatment pathways (for example, transplant approval).   

Robust advocacy and navigation programs can create dramatic financial and human impact, such as helping a member access a previously denied life-saving procedure simply by identifying an in-network facility that meets carrier criteria. When budgets are tight, year-round education campaigns can shift employee healthcare utilization patterns resulting in cost savings.

4. Addressing social determinants of health -Factors like transportation, childcare, housing stability, and workplace culture influence whether employees can follow through on care plans. Employers can:

• • Coordinate with vendors that address social needs (transportation, food security, financial education). 
  • Support flexible work policies that make it easier to attend appointments. 
  • Create a culture that values mental health, inclusion, and psychological safety. 
  • Ensure access to care through virtual and telemedicine programs. 

When employees are supported across health, wealth, and environment, they are more likely to engage in preventive care and manage chronic conditions effectively.

Practical Cost Containment Steps Employers Can Take Now 

Not every employer is self-funded, and not all have access to full claims data on day one. Still, there are concrete actions organizations of all sizes can begin taking: 

1. Secure and use your data

• • For credible groups, make access to claims and pharmacy data a condition of doing business. 
  • Where data is limited, explore alternative funding arrangements (such as level funding or participation contracts) that unlock reporting. 
  • Consider feeding claims data into an independent warehouse or analytics platform to identify trends, outliers, and cost drivers.

2. Optimize plan design for smart utilization

• • Incentivize high-value place of service (for example, lower co-pays for primary care, telehealth, and ambulatory surgery centers). 
  • Use preventive drug lists in high-deductible health plans where permitted to reduce barriers to critical medications. 
  • Design lower co-pays for routine, preventive, and chronic care to reduce the risk of delayed treatment that leads to high-cost claims. 

      3. Tackle pharmacy waste 

• • Conduct a pharmacy spend diagnostic to identify non-essential utilization and top medication cost drivers. 
  • Evaluate specialty cost containment solutions, discount and mail-order programs, and diabetes management or reversal programs. 
  • Ensure prior authorization programs are clinically sound, not just auto-approved or auto-denied. 

4. Leverage carrier programs and point solutions

Especially for smaller employers, many underutilized programs already exist within carrier offerings. These may include: 

• • Condition management programs for diabetes, musculoskeletal issues, maternity, or sleep.
  •  Mental health and EAP resources. 
  • Telehealth and virtual primary care. 

The key is communication and engagement. If employees do not know how or when to use these resources, there is no ROI. 

5. Align stakeholders and break down silos

• • Bring HR, finance, benefits, pharmacy, and wellbeing partners into the same conversation. 
  • Coordinate plan design changes with population health and pharmacy strategies, rather than addressing each in isolation. 
  • Use joint analytics reviews to determine where changes reduce cost without harming member experience. 

What About Smaller Employers With Limited Data? 

For smaller, fully insured employers, it can feel like there are fewer levers to pull. However, meaningful steps still exist: 

• Invest in education: help employees understand benefit options, costs, and how to access the right care in the right setting.
• Maximize use of carrier-provided wellbeing,condition management, and navigation tools.
• Consider biometric screenings or health assessments to surface risk and connect employees to coaching or next steps.
• Work with an advisor who is willing to push carriers on data access and help you evaluate when it makes sense to transition to a funding model with more transparency. 

Closing the Loop: You Are Not Powerless 

Rising healthcare costs can feel inevitable, but employers have far more control than they often realize. By combining data analytics, pharmacy expertise, population health strategies, care navigation, and thoughtful plan design, organizations can: 

• Reduce waste and unnecessary spend. 
• Improve access and outcomes for employees and their families. 
• Make healthcare costs more predictable and sustainable over time. 

When employers focus on both health and wealth, they create benefit strategies that not only protect the bottom line but also build a healthier, more resilient workforce.

Ready to cancel the waste in your health plan?

Explore how OneDigital’s integrated cost containment, pharmacy, analytics, and wellbeing strategies can help you cut waste, protect your budget, and support a healthier workforce.