The Consumer Price Index has seen a massive increase due to inflation, hitting a 9.1% increase year-over-year in June, according to the Bureau of Labor Statistics. Of course, this shift has adversely affected employees’ cost of living. However, it has also had a serious impact on employers’ health care costs.

Organizations that want to hold on to top talent can’t combat increased costs by simply shifting the burden to employees. Instead, they must seek innovative ways to protect their bottom line while preserving their benefits offerings. The following six options are a few examples of outside-the-box cost-saving strategies your business may want to consider as you strive to make smart benefits decisions amid this period of high inflation.

1. Consider Alternative Funding Arrangements

More and more employers are turning to alternative funding mechanisms as a solution to out-of-control benefits costs. Self-insurance, for example, is an arrangement in which a health plan is funded entirely by an employer. The employer pays for employee health claims, not an insurance company, which gives the employer greater control of plan design.

This increased level of control enables employers to make cost-effective choices, like establishing stop-loss limits so they’re guaranteed to never spend over a certain amount in any given year. Amid the economic downturn and ever-increasing costs, it’s worth considering what else is out there other than the traditional fully insured arrangement.

2. Explore Reference-Based Pricing

Reference-based pricing (RBP) enables employers to buy health services from hospitals and facilities at reimbursement rates significantly below the amount that insurance carrier networks contract with hospitals for reimbursements — 15 to 30% below, in fact. Simply put, RBP mitigates the risk of employers paying exorbitant prices for services that could be done more cost effectively.

Additionally, due to recent advancements in price transparency laws, RBP has become a vehicle that may lead to direct contracting and cash prepayment of services, creating cohesion between employers and medical facilities while limiting the costs and ambiguity associated with middlemen.

3. Shop Pharmacy Benefits

Self-insured employers have the capacity to purchase their pharmacy benefits from a separate, unaffiliated benefits manager that exists outside of the medical plan contract. By going through a rigorous marketing exercise to review pharmacy contract stipulations around drug rebates, discounts and classification, employers can reduce pharmacy program costs by 8 to 25%, depending on the depth of their strategy considerations.

4. Demand Payment Integrity

Self-insured employers also have the option to utilize payment integrity to avoid the overpayment of erroneous claims. This process ensures that claims are accurate and free of “upcoding” — a process by which medical providers intentionally overprice services.

5. Consider Captives

Captives allow employers to pool associated risks together to create a larger, more predictable sample size that is better suited to disperse large risks across broader populations, thus diffusing concentrated risk. This offers employers the opportunity to avoid unnecessary risk and secure additional savings. As captives run efficiently, employers can also receive dividend disbursements of any cash left in the captive pool after all liabilities are paid.

6. Carve Out Costly Health Care Expenses

A common misconception that employers fall prey to is the belief that “network discounts” are the cheapest means by which to buy health care. This fallacy can lead to employers paying 20 to 50% more than is necessary for large-ticket procedures, such as transplants and dialysis. To avoid making this costly mistake, employers can review their claims data, analyze patterns of hospital patronage by their covered members and evaluate expected medical event rates to determine which services should be purchased directly at a lower price point.

As your organization adjusts to increasing inflation rates and the rising costs that follow, there are several strategies you can use to help offset the severity of these increases. See some of our Health Innovations Practice’s cost-saving solutions in action by downloading the Strategic Outcomes Playbook.

If you’re seeking tailored guidance to help you fight high inflation, connect with our experts at CBIZ Employee Benefits.