6 Strategies to Lower Employer Healthcare Costs in 2025

For most organizations, healthcare remains one of the largest and fastest-rising benefit expenses. And the challenge is only growing.

According to HUB International (2025), employer healthcare costs are projected to jump 8.4% in 2026, adding roughly $1,300 per employee to already strained benefit budgets. For a company with 200 employees, that means more than $260,000 in additional costs in a single year. The drivers are clear: higher utilization (especially mental health), soaring prescription drug costs, provider inflation, worsening population health, and new mandated benefits. These pain points are squeezing employers of all sizes — leaving HR and finance leaders scrambling for solutions.

So how do you reduce healthcare costs for your organization without cutting vital benefits or passing more expenses to your employees? The answer lies in proactive, practical strategies that both control costs and support employee well-being.

Here are six proven strategies to reduce healthcare costs in your organization in 2025:

Methods for Reducing Healthcare Costs 

1. Telemedicine → Tackling Increased Utilization

Pain Point: Employees are using more healthcare services post-pandemic, especially for outpatient visits and mental health. Demand for mental health services and specialty care has surged, driving both higher claim frequency and costs.

Strategy: Telemedicine gives employees quicker, lower-cost access to care while reducing unnecessary in-person visits. Virtual appointments typically cost a fraction of traditional office visits, and they make it easier for employees to get care without missing large chunks of work. Employers save on claims while also providing much-needed support for mental health access.

Action Items for Employers:

• Audit your plan benefits: Confirm whether your existing health plan already includes telemedicine options (many do, but employees may not be aware).
• Promote awareness: Run a simple communications campaign — email, intranet, posters — so employees know how and when to use telehealth.
• Remove barriers: Cover telemedicine visits with no or low copays to encourage usage. Employees are far more likely to choose virtual care if it’s affordable.
• Highlight mental health access: Call out tele-behavioral health specifically. Many employees avoid in-person visits due to stigma or logistics; virtual options increase access and reduce costs.
• Track usage & claims data: Partner with your carrier to monitor utilization and cost savings from telehealth adoption.

By taking these steps, employers can shift utilization away from high-cost office and ER visits while giving employees accessible, stigma-free options for care.

2. Medical Case Management → Addressing Population Health & Severity

Pain Point: Chronic conditions such as diabetes, heart disease, and obesity are on the rise, and when left unmanaged, they lead to higher-cost claims. Worsening population health is increasing both the severity and frequency of claims, especially in mental health and chronic disease management. Employers end up footing the bill for more ER visits, longer hospital stays, and more complex treatments.

Strategy: Medical case management connects employees with trained professionals who help them navigate treatment plans, coordinate care, and avoid unnecessary tests or procedures. By ensuring employees follow appropriate care pathways, case management reduces claim severity, prevents costly hospital readmissions, and improves overall health outcomes.

Action Items for Employers:

• Partner with your carrier or a third-party provider: Many insurers already offer case management programs — verify what’s included and how your employees can access it.
• Identify high-risk populations early: Use claims data (HIPAA-compliant reporting) to flag employees who may benefit from case management, such as those with multiple chronic conditions or frequent hospital visits.
• Educate employees: Case management is often underutilized simply because employees don’t know it exists. Make it part of onboarding and wellness communications.
• Integrate with wellness incentives: Encourage participation by tying milestones (attending follow-ups, completing screenings, adhering to treatment) to small rewards, like gift cards.
• Measure results: Track reductions in ER visits, readmissions, or duplicate diagnostic tests as ROI indicators.

By helping employees manage conditions before they escalate, case management turns reactive healthcare spending into proactive cost control — keeping both employees and budgets healthier.

3. Build Integrated Well-Being Programs → Preventing Chronic Disease & Claim Severity

Pain Point: Chronic disease management is one of the most expensive cost drivers for employers. Unhealthy lifestyle factors like poor nutrition, lack of exercise, and untreated stress increase the likelihood of costly claims over time. Left unchecked, these issues escalate into expensive conditions such as diabetes, heart disease, and hypertension.

Strategy: Well-being programs incentivize employees to stay active, complete preventive screenings, and adopt healthier behaviors. By engaging employees early, organizations can reduce the long-term costs of chronic conditions while improving productivity, morale, and retention.

Action Items for Employers:

• Start with screenings: Offer incentives for employees who complete biometric screenings or annual preventive care appointments. Early detection lowers long-term claims.
• Support mental health: Provide workshops, stress-reduction programs, or mindfulness tools — and reward participation to encourage adoption.
• Gamify healthy habits: Run step challenges, fitness contests, or nutrition tracking initiatives that reward consistency, not just one-off wins.
• Incentivize with flexibility: Use the Engage2Reward™ Gift Card Ordering Platform to deliver gift cards instantly across 250+ top brands for activities such as:

• • Completing a biometric screening
  • Participating in a mental health workshop
  • Reaching step or activity goals
  • Staying up to date with preventive care

Gift cards remain one of the most-requested rewards among employees, making them an effective way to boost participation and sustain engagement. For HR teams, the Engage2Reward Platform provides a seamless way to track, distribute, and manage incentives — turning wellness efforts into measurable healthcare cost savings.

4. Catastrophic Insurance → Managing Regulatory & Legislative Impacts

Pain Point: New mandated benefits, such as expanded infertility coverage or mental health requirements, are adding to plan costs for employers. For small businesses in particular, these requirements can significantly increase premiums and strain already tight budgets.

Strategy: Catastrophic insurance offers a safeguard by covering major, high-cost medical events while keeping premiums lower. Employees handle routine or minor healthcare expenses out of pocket, but the employer and workforce remain protected against catastrophic claims. This structure allows small employers to stay compliant with mandated coverage without overextending on day-to-day benefits.

Action Items for Employers:

• Review current coverage: Work with your broker or carrier to compare traditional fully insured plans against catastrophic options, especially if you have fewer than 50 full-time employees.
• Pair with preventive programs: Because catastrophic plans shift more day-to-day costs to employees, it’s critical to invest in preventive measures (like screenings and wellness incentives) to keep conditions from escalating into high-cost claims.
• Communicate clearly: Employees may be wary of higher out-of-pocket costs. Provide education on how catastrophic coverage works and how it protects them from financial risk in the event of serious illness or injury.
• Explore supplemental options: Offer voluntary benefits (such as telemedicine or health savings accounts) alongside catastrophic coverage to round out support and keep employees engaged.
• Monitor regulatory changes: Catastrophic plans can be affected by state and federal mandates. Stay in close contact with advisors to ensure ongoing compliance.

By combining catastrophic coverage with smart preventive health initiatives, small employers can manage premiums, stay compliant, and still give employees a meaningful safety net.

5. Nurse Advice Lines → Reducing Inflation & Overutilization Costs

Pain Point: Provider consolidation and wage inflation are driving up service rates across the healthcare system. As contracts are renegotiated, employers face higher costs for the same services. When employees default to urgent care or ER visits, often out of uncertainty, the price tag multiplies.

Strategy: Nurse advice lines give employees 24/7 access to qualified nurses who can answer questions, triage symptoms, and recommend the most appropriate next step. This reduces unnecessary ER and urgent care visits, ensuring employees get the right level of care at the right time. Employers save on claims while employees get peace of mind.

Action Items for Employers:

• Check your plan: Many carriers already offer nurse advice lines; confirm if it’s included in your benefits and highlight it in employee materials.
• Promote availability: Make sure employees know it’s available 24/7, toll-free, and can be accessed before heading to urgent care. A simple “call before you go” campaign can shift behaviors.
• Integrate with wellness communication: Include nurse line info in onboarding packets, intranet pages, and benefits reminders so it becomes part of your culture of care.
• Remove barriers: Ensure there’s no cost to employees for using the service. If employees worry they’ll be billed, they’re less likely to call.
• Track utilization & outcomes: Partner with your provider to measure how often the nurse line is used and the estimated savings from avoided ER or urgent care visits.

When employees have access to immediate, trusted guidance, they’re less likely to overutilize high-cost services — a win for both your budget and their well-being.

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6. High-Deductible Plans → Controlling Prescription & Service Inflation

Pain Point: High-cost prescriptions — including GLP-1 drugs for diabetes and weight loss, specialty medications, and autoimmune treatments — are driving employer healthcare costs sharply upward. Combined with inflation in provider services, these expenses make traditional plan premiums harder to sustain.

Strategy: High-deductible health plans (HDHPs) paired with health savings accounts (HSAs) or flexible spending accounts (FSAs) help employers lower premiums while giving employees tax-advantaged ways to manage routine healthcare expenses. These plans still cover essential preventive services at no cost, ensuring employees don’t skip critical screenings or vaccines. Employers save on premiums, and employees gain greater control over their healthcare dollars.

Action Items for Employers:

• Evaluate workforce demographics: HDHPs work best with younger or generally healthy employee populations. Review claims data to see if your workforce is a fit.
• Pair with HSAs/FSAs: Offer employer contributions to employee HSAs to offset higher deductibles. Even modest contributions increase adoption and satisfaction.
• Communicate clearly: Educate employees on how HDHPs function, emphasizing that preventive services (like checkups and vaccines) are still fully covered.
• Provide decision support tools: Use plan comparison guides or cost calculators so employees can choose the option that best fits their situation.
• Combine with wellness incentives: Encourage preventive care and condition management by tying rewards — such as gift cards through the Engage2Reward Platform — to actions that help employees avoid costly claims.

When designed and communicated effectively, HDHPs help employers contain premium growth while equipping employees to make smarter healthcare decisions — a balanced response to rising prescription and service costs.

Closing

By connecting cost-reduction strategies directly to today’s biggest healthcare expense drivers, employers can manage budgets more effectively while still supporting their workforce. Whether through telemedicine, preventive wellness programs, or flexible rewards like gift cards from the Engage2Reward™ Platform, the goal is the same: reduce healthcare costs while keeping employees engaged, healthy, and supported.

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