The Cost Surge Dilemma: How Employers are Taking Back Control

Originally published by HealthCorum

Increased pressure for employers to provide more workers coverage with the upcoming Medicaid cuts, tightening payer revenue, and stricter regulatory oversight are pushing employers to take a more proactive role in addressing these, and the general healthcare cost, challenges.

The Drivers Behind the Shift

The financial strain on employers is intensifying due to escalating healthcare costs. The PwC "Behind the Numbers 2026" report projects an 8.5% medical cost trend for the Group market, with a 7.5% trend for individual markets, reflecting increases in hospital expenses, a notable rise in inpatient behavioral health claims, and a significant uptick in prescription drug spending, particularly for obesity and chronic disease treatments. With traditional cost-containment levers less effective, employers are exploring innovative strategies. These include direct contracts with drug manufacturers to bypass pharmacy benefit managers (PBMs), partnerships with primary care providers (PCPs) for coordinated care, and the co-design of networks using performance-based data.

The Role of Targeted Data in Network Design

Persistent variation in care delivery and cost, even within the same region, remains a critical hurdle but also presents significant opportunities for cost savings. As you can see in the example below there is extensive variation in average cost per patient even amongst Orthopedic providers of the same speciality in a single metro area.

Variation in Cost Efficiency

Average medical professional cost per provider per patient (standardized rate). Source: HealthCorum

Employers developing tailored networks require robust data tools to identify providers with strong clinical outcomes, lower total costs, and consistent referral patterns beyond merely relying on existing in-network options. Additionally, the right data can support novel contracting models, such as direct agreements with PCPs to manage chronic conditions or with drug manufacturers to secure better pricing. This approach enables a more comprehensive evaluation of value that includes drug and primary care efficiency. However, this transition poses challenges for health plans, third-party administrators (TPAs), and PBMs who must adapt by offering transparent insights or risk losing marketshare. Those that provide actionable data on performance, pricing, and outcomes can position themselves as valuable partners in this evolving model.

Opportunities and Risks of Employer-Led Strategies

The rise of employer-led networks offers fresh opportunities but also introduces risks. Direct contracting with drug manufacturers could streamline pharmaceutical costs, while PCP partnerships might enhance preventive care, potentially reducing long-term expenses. Yet, fragmented care coordination, misaligned benefits, and limited scalability could undermine these efforts. Successful networks hinge on a strategic foundation: clearly defined goals, consistent inclusion criteria, and effective use of existing data. For traditional players, the shift presents a chance to collaborate by supplying tools that support these initiatives.

As regulatory and cost pressures mount, the healthcare sector may increasingly rely on these strategies to balance cost and quality.

---

> READ THE ORIGINAL POST