Healthcare consumers and employers who sponsor benefits plans continue to battle rising costs. According to a August 2025 Peter G. Peterson Foundation article, the United States spent roughly $4.9 trillion, or more than $14,570 per person, annually. As a percent of GDP, we spent 18% in 2023.
What Is Cost Containment?
Cost containment refers to the strategies, tools, and decisions employers use to reduce the cost of healthcare benefits — without sacrificing quality of care. These strategies apply to organizations of all sizes and across all funding types, from fully insured plans to self-funded arrangements.
Unlike long‑term wellness initiatives, cost containment strategies can create immediate, measurable financial impact. They help employers eliminate waste, improve plan efficiency, and guide employees toward better healthcare decisions.
Top Cost Containment Strategies for Healthcare Benefits
Most successful cost containment programs focus on three core areas.
1. Eliminate Unnecessary Spending
Your organization can reduce unnecessary healthcare costs through targeted, data-driven strategies.
One effective approach is conducting a dependent eligibility audit. According to BMI Audit Services, up to 10% of dependents enrolled in employer-sponsored health plans may be ineligible for coverage. Removing ineligible dependents not only reduces immediate premium and claims costs, but also limits exposure to high-risk claims. For many employers, this translates into meaningful annual savings and a stronger return on investment from their existing benefits program.
It’s also critical to be intentional about what you include in your benefit policies. Before finalizing plan design decisions — such as choosing between a PPO or HSA, or setting copays and deductibles — employers should evaluate current utilization patterns, workforce demographics, and compensation levels. Healthcare plans are not one-size-fits-all; designing coverage around the needs and behaviors of your specific population helps encourage appropriate utilization and manage costs more effectively over time.
2. Optimize Your Funding Arrangement
Another key lever in healthcare cost containment is optimizing your funding arrangement. The right funding model depends on your organization’s size, risk tolerance, cash flow, and long-term benefits strategy. Below is a high-level overview of common funding options — though it is not an exhaustive list.
Flexibility with Fully Insured vs. Self-Funded Plans
The primary difference between fully insured and self-funded plans is who assumes the financial risk. With fully insured plans, the insurance carrier bears the claims risk in exchange for fixed monthly premiums and predefined plan options. This arrangement offers predictability but limited flexibility.
In contrast, self-funded plans place the claims risk on the employer while offering greater control over plan design, networks, and cost-containment strategies. Employers pay actual claims as they occur, along with administrative fees and stop-loss premiums, which help protect against catastrophic or unexpectedly high claims.
Balance with Level-Funded Plans
Level-funded (or partially self-funded) plans blend elements of both fully insured and self-funded arrangements. These plans provide more customization and claims transparency than fully insured options, while maintaining predictable monthly payments.
Level-funded plans also include individual and aggregate stop-loss coverage to cap employer risk. For many small to mid-sized employers — often those with fewer than 100 employees—this model can be an effective way to gain greater cost control without taking on excessive financial exposure.
Shared Costs with Association Health Plans
Association Health Plans (AHPs) allow small businesses or sole proprietors with common geographic or industry characteristics to band together as a larger purchasing group. By pooling risk, participating employers may gain access to broader coverage options and more competitive pricing than they could obtain on their own.
While AHPs can offer meaningful savings and plan flexibility, availability and regulatory requirements vary by state, making careful evaluation and compliance oversight essential.
No single funding arrangement is universally “best.” The most effective approach is one that aligns financial risk, plan flexibility, and employee needs, while supporting long-term cost management.
3. Create Better Clinical Outcomes
Improving clinical outcomes is a critical — yet often overlooked—component of healthcare cost containment. By encouraging preventive care, optimizing prescription drug utilization, and leveraging population health strategies, employers can help employees receive more appropriate care while reducing avoidable costs. Below are several ways to support better outcomes across your workforce.
- Engage employees in meaningful wellness initiative: Wellness programs are most effective when they drive sustained engagement rather than one-time participation. Encouraging preventive care visits, promoting physical activity, and offering incentives or friendly competition can help reduce sedentary behaviors and support long-term health — ultimately lowering the incidence of high-cost chronic conditions.
- Implement targeted education and prescription programs: Internal education initiatives can help employees make more cost-effective healthcare decisions, particularly when it comes to prescription medications. By promoting the use of clinically equivalent generic drugs and educating employees on formulary options, employers can reduce pharmacy spend while maintaining quality of care.
- Leverage population health management data: Population health data enables employers to identify trends, gaps in care, and high-risk populations within their workforce. This insight supports more informed decisions around benefit design, wellness initiatives, and clinical programs — helping improve the overall employee experience while managing costs more effectively.
With healthcare benefit costs continuing to rise, it’s never too late to evaluate your cost containment approach.
Cost Containment Is More Important Than Ever
As healthcare benefits continue to grow more expensive, employers can’t afford to take a passive approach. The good news is that effective cost containment strategies don’t just reduce spending — they also improve the employee experience and support better long‑term health.
The three strategies above are a strong starting point, but the most successful programs go deeper. Our employee benefits experts analyze your data, understand your goals, and negotiate with carriers to build a cost‑efficient, high‑quality benefits program that works for your organization.
