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Managing Healthcare Costs

Free «Managing Healthcare Costs» Essay Sample

Healthcare is one of the most expensive benefits an employer may provide. HR Professionals need to develop and execute cost management strategies to ensure that efficiency and suitability in the cost of employment. In the recent past, the cost of healthcare and other benefits in the US has escalated due to the changes in the employment laws that make it mandatory for employees to be put on a health care plan or the Affordable Care Act. Among other factors, the payable premiums keep rising year after year. In the year 2016, the average medical cost for employees was well above the US $ 5,000, which is very high as compared to the average cost of other benefits. HR professionals play a critical role in the management of the costs that eventually contribute to the overall profitability of an organization (Noe, Hollenback, Gerhart, & Wright, 2015). An HR professional in a company should look into ways to implement programs and develop initiatives that help reduce the healthcare costs.

Background of the Problem

The cost of healthcare is the primary concern, because it is rising faster than the growth of many economies. Consequently, the hospital costs are increasing year after year. It is happening despite the slower growth of the economy of many other jurisdictions. This underlines the need for employers to think outside the box and reassess healthcare as a benefit for employees (Flynn, Mathis, Jackson, & Valentine, 2015). Healthcare benefits have become a critical component of any employee compensation package and employers need to look for a way to contain the costs. For an employer to attract the best talent in the market, they should not only offer good salaries, but competitive medical coverage too. A potential employee will look at the healthcare benefits, especially if they have dependents, and study how inclusive the cover is. This research will focus on the ways Human Resources offices can manage health care costs. Rodak (2013) and the Society for Human Resources Management (2017) provide some ideas on managing costs as outlined below so as to contain high healthcare expenditure.

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Negotiating for Lower Medical Benefits with the Employees

An HR Professional can negotiate for lower medical benefits at the point of engaging an employee. It can be done in return for other cheaper benefits like bonuses that are performance-based, which ensures that the employee is rewarded with bonuses based on company performance (Unicorn HRO, 2016). These benefits are not as fixed as the health benefit and only ensure that the employee is paid according to their own achievements. Although an HR professional may not be able to negotiate much with the existing employees, they can take advantage of lowering and managing the health care costs through new hires during the on-boarding process.

Encouraging Healthy Lifestyles for the Employees

Encouraging staff to lead healthy lifestyles is critical to contain the medical costs. It becomes especially important for the funded schemes whereby the company pays the money spent by its employee during any hospital visit. The company can run wellness programs aimed at encouraging the employees to have healthy lifestyles and minimizing their visits to the hospital. Thus, the employees should take charge and control their health. The company may decide to sponsor the employees to go to a gym or a fitness facility, which helps avoid many lifestyle diseases (Society for Human Resources Management, 2017). The company can ensure further compliance and attendance for gym sessions by imposing penalties for non-attendance. If an employee fails to attend their monthly scheduled gym sessions, a penalty is imposed on them. It will ensure strict compliance and eventually save the company healthcare costs which are considerably high.


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Employee Participation in the Healthcare Plan and Incorporation of Co-Pay

Companies and HR professionals can come up with health care plans that ensure employee participation. It can be done through co-pay whereby the employee contributes to their medical coverage. It can be done in conjunction with the hospitals and service providers in the medical provision panel, so when an employee visits a facility for medical services or treatment, they are required to partially pay for the treatment cost (Rodak, 2013). It will ensure that the employees only seek the essential treatment. Therefore, employees will not go for unnecessary check-ups just because they have medical coverage.

Pooling the Insurance Risks

A company as a whole has many assets and facilities that need to be covered under insurance programs. An HR professional can negotiate all the company risks, including medical, non-medical, life covers, and general insurance covers, so that the firm can benefit from negotiated discounts. It will help the company to benefit from economies of scale. It eventually ensures that medical coverage is offered at a much lower price resulting from the negotiated discounts (Rodak, 2013). It helps healthcare professionals to manage the costs related to employee healthcare.

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Tendering Health Insurance

Bidding is a process through which a company can list all of its requirements to find the most fitting medical services by appealing to the providers of such services. The providers are then required to bid for the provision of such services. The company awards the tender to the group which they think has fit most requirements in the delivery of such services. One of the consideration is the cost put forth by the organizations. The company has an opportunity to go to the provider who is the lowest bidder while still not compromising the quality of the services (Society for Human Resources Management, 2017). Tendering means that a business asks medical provider companies to bid and it awards the tender to the most competitive provider. It helps HR to manage health care costs.

Health Education and Talks to Employees

Employees are the sole consumers of health costs. It is important that they understand the intricacies and details of such expenses. If they understood the subject more, they would most likely be better consumers and contribute to the overall goal of health costs management. HR professionals should make the employees understand the cost of medical coverage and educate them on how they can contribute to the reduction of such expenses. They can organize health talks for the employees to explain the coverage limits, service provider panelists, and the costs of each provider and urge them to seek treatment in cheaper facilities (Rodak, 2013). Most importantly, it is important for the employees to learn how to efficiently use their medical cover so that they do not exhaust it early into the cover period and go uncovered for the rest of the time. This kind of education makes the employees better consumers and ensures better management of the health care costs.

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Reimbursement-Based Programs

Most medical covers work through a smart card system. Employees receive a card that has a prescribed limit and the employees present that card in the hospital or other health facilities to access the medical service. It becomes straightforward for the employees to just give that card without having to pay anything. This can lead to employees seeking medical attention even in situations when they could have avoided going to a hospital. An HR professional can come up with programs that ensure that the staff goes to a health facility and pays cash for seeking medical services and asks for reimbursement (Society for Human Resources Management, 2017). This makes it harder for workers  to keep on going to hospitals and helps manage healthcare costs.

Preferred Service Providers

An HR professional can come with a panel of preferred service providers based on the money they charge and their efficiency. They can seek to work with the facilities that are cheaper without compromising the quality of medical care offered to the employee. If a worker uses facilities that are not on such panels, they can be asked to pay cash and seek reimbursement later (Rodak, 2013). Furthermore, this helps make health facilities more conscious and work towards efficiency in health services provision. Therefore, HR professional can lower the health costs, which as discussed have been on the rise in the recent past.

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Having Cover Limits on the Health Plans

A cover with no limits can be prone to misuses by both the employee and the health facility. The employee can seek all sorts and manners of treatment with no consideration or care regarding the implications they have on the expenses of the company. Health facilities are also known to take advantage of these kinds of covers and exploit the business by ordering unnecessary medical procedures (Society for Human Resources Management, 2017). HR professionals can come up with cover limits for each employee depending on their rank in the company. For example, they can have gold, silver, bronze, etc. covers that have prescribed limits for each category. It will help manage the overall costs.

Increasing the Employee Contribution

Branded drugs are costly to access. HR professionals can increase the cost-sharing ratio between the employee and the organization by reducing the rate of branded drugs use. This will ensure that the employee will request the doctor or other medical officer to prescribe generic medicines if they can work as a treatment plan equally well because they are cheaper than the branded drugs (Unicorn HRO, 2016). In situations whereby the employee is prescribed a branded drug, the employee contribution to such a treatment can be increased to cover the difference between the price of generic and branded medicines. Furthermore, this ensures that an employee is conscious of the costs and helps in the management of such expenses.

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In the recent past, there has been an emergence of virtual doctors who the patients do not need interact with face to face. The patient interacts with the doctor virtually through the phone or video conferencing. The diagnosis and the treatment prescription is done during such virtual interactions. It is much cheaper as compared to the regular hospital visits (Unicorn HRO, 2016). Employee must be educated on the benefits of this kind of medical help so they can utilize it. HR professionals can organize telemedicine channels and help bring down the health care costs in the organization.


In conclusion, the HR practitioners of companies should work together with other officers, including the finance staff, to bring down and maintain the healthcare costs at a minimum. Effective communication between the health stakeholders, be it the employees or health facilities, ensures that each party understands their contribution to bringing down the healthcare costs. For instance, the employees should be given tools to make healthy choices because as observed they are the consumers and the biggest contributors towards this cost. Technology is a critical part of our day to day life, so incorporating technology in the management of health care costs is very important. It calls for an almost daily monitoring of utilization of the existing medical benefits, and an alarm should be raised when excesses or threats of escalation are noted.

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