What’s Driving Healthcare Costs for Employers

Employers increasingly feel they have lost control over healthcare spending because the system is not structured to serve them or their people.

Organizations are moving beyond simply managing renewals and are focusing on identifying what is truly driving healthcare costs and how to respond strategically.  

A More Proactive and Strategic Approach to Healthcare

Every employer conversation lately is starting from the same foundation. Organizations are being asked to take a more intentional and disciplined approach to healthcare strategy. 

A More Structured Approach to Benefits Decision-Making

Employers are prioritizing a more structured approach to health plan decision-making: 

• Bringing forward new ideas and insights before renewal pressure builds  
• Focusing on high-impact strategies that influence cost trends  
• Leading with confidence through complex conversations across providers, hospitals, insurers, and pharmacy  

This shift reflects a broader recognition that healthcare is undergoing a transformation and requires a more proactive response. 

Understanding Healthcare Cost Drivers and the Need for Transparency

Gaining control over healthcare costs starts with understanding how the system actually operates. Without clear visibility into the forces driving spend, employers are left reacting to outcomes rather than shaping strategy. 

Why Employer Transparency Matters

To better understand cost drivers, healthcare leaders across hospitals, provider groups, and insurance organizations are being brought into the conversation. 

These perspectives help employers understand how each part of the system contributes to rising costs and how those dynamics impact their health plans. 

This approach is grounded in a clear objective: 

• Provide visibility into how the healthcare system operates  
• Help employers understand how costs are generated  
• Enable more informed decision-making  

Shifting Employer Expectations

As a result, employers are showing increased urgency when it comes to healthcare strategy.

Interest in cost transparency and strategy has significantly increased, with more organizations actively seeking guidance on how to better understand their healthcare spend. 

Employers are moving away from traditional assumptions: 

• Rising renewal costs are no longer being accepted as inevitable  
• Lack of transparency is no longer considered acceptable  

Employers are no longer willing to operate without influence over cost drivers  

Instead, organizations are seeking greater clarity and control over their healthcare strategies. 

Key Drivers Behind Rising Healthcare Costs 

Several key factors continue to influence rising healthcare costs. 

System-Level Cost Drivers

Government Program Pressure 

Underpayment from Medicare and Medicaid places financial pressure on providers. These costs are often shifted to employer-sponsored health plans. 

Hospital Economics and Consolidation 

As healthcare systems consolidate and more care shifts to hospital-owned settings, costs often increase due to higher billed rates and facility-based pricing. 

Insurance Incentives and Limited Transparency 

Insurance carriers must balance transparency with network and contracting strategies. Bundled arrangements between medical and pharmacy benefits can obscure true cost drivers. 

Workforce and Experience Challenges

Patient Experience and System Complexity 

For employees, navigating healthcare can be challenging due to: 

• Multiple billing structures  
• Inconsistent pricing  
• Limited visibility into quality and value  

These challenges contribute to inefficiencies and increased costs across employer-sponsored plans. 

Why Healthcare Cost Drivers Matter for Employers 

These cost drivers are not theoretical. They directly impact claims experience, renewal outcomes, and long-term financial planning. 

Employers must understand these forces in order to: 

• Make informed funding decisions  
• Evaluate plan design and vendor strategies  
• Improve cost predictability  

Without this understanding, organizations remain reactive rather than strategic. 

OneDigital’s Commitment to Helping Employers Navigate Healthcare Costs 

OneDigital is focused on helping employers better understand and respond to healthcare cost drivers. 

Supporting Employers With Greater Clarity 

This includes: 

• Providing insights from across the healthcare system  
• Helping employers reframe how they think about healthcare costs  
• Translating complex information into clear, actionable strategies  

Improving Employee Experience and Outcomes 

Employers are also supported in helping their employees: 

• Navigate healthcare decisions more effectively  
• Access higher-value care options  
• Avoid unnecessary costs and inefficiencies  

What Employers Should Do Next 

As organizations prepare for upcoming renewals and planning cycles, several priorities should guide decision-making. 

Employers should:

• Focus on understanding what is driving healthcare costs through data and insights
• Re-evaluate long-standing plan design, carrier, and network assumptions
• Identify opportunities across network design, care navigation, pharmacy, and cost containment

How to Take Action on Healthcare Cost Strategy 

Understanding healthcare cost drivers is only the first step. Employers that take a proactive approach to strategy are better positioned to: 

• Improve financial outcomes  
• Strengthen employee experience  
• Reduce long-term cost growth  

For 25 strategies to lower workforce costs without cutting coverage, dive into our Cost Containment Playbook.  

Talk with a OneDigital Benefits Expert to explore how these insights apply to your organization and begin building a more informed and effective healthcare strategy.