The cost of healthcare continues to escalate, placing a significant financial burden on all stakeholders in the self-insurance ecosystem – from employers and insurers to third-party administrators (TPAs) and stop-loss carriers. With healthcare costs projected to increase 5.8% in 2025 – the third consecutive year exceeding 5% growth – managing expenses while maintaining plan effectiveness is becoming increasingly challenging to plan sponsors and fiduciaries.
Several factors contribute to rising costs, including specialty drug prices, high-cost medical claims and billing inefficiencies. Specialty drugs, while only a small fraction of total prescriptions, now account for over 54% of prescription drug spending. Additionally, overuse of medical services, excessive hospital stays and administrative complexities drive up costs without necessarily improving patient outcomes.
To mitigate financial strain, employers and payors must adopt cost-containment measures that ensure financial sustainability without compromising care quality. Three effective strategies include claims negotiation, repricing by preferred provider organization (PPO) networks and line-item bill review – each playing a critical role in reducing waste, improving billing accuracy and resolving disputes efficiently.
Challenges in Managing Healthcare Costs and Plan Performance
The financial impact of inaccurate or excessive medical billing is substantial, with studies estimating that billing errors, duplicate charges and incorrect coding account for 7-10% of all healthcare payments. These errors result in significant overpayments, making it essential for payors to implement rigorous review processes to ensure that medical bills accurately reflect services rendered.
High-cost medical claims are another major concern, particularly as multimillion-dollar claims become more common. Recent reports indicate that claims exceeding $1 million have surged 45% over the past five years, primarily due to:
- Expensive specialty drug treatments for chronic conditions and rare diseases.
- Extended hospitalizations and complex surgical procedures.
- High-cost therapies, such as cancer treatments and cardiovascular interventions.
In addition to high-cost claims, the administrative burden of resolving disputes adds another layer of complexity. The No Surprises Act, designed to protect patients from unexpected medical bills, introduced an Independent Dispute Resolution (IDR) process to resolve payment disagreements between insurers and providers.
However, the system has been overwhelmed – nearly 490,000 disputes were submitted between April 2022 and June 2023, with 61% remaining unresolved. These delays can lead to prolonged financial uncertainty for payors and providers alike.
Without an effective strategy in place, these challenges threaten the financial stability of employer-sponsored health plans, leading to higher premiums, increased cost-sharing for employees and constrained budgets for businesses.
How to Reduce Spending and Improve Plan Performance
Claims Negotiation: Lowering Costs on High-Expense Claims
Claims negotiation helps employers and payors secure lower reimbursement rates for out-of-network claims and high-cost medical treatments. By working directly with providers, negotiators can identify billing errors, leverage benchmark pricing data and reach mutually beneficial agreements that align with industry standards. Experienced professionals with negotiating expertise can achieve significant savings. Strong relationships with providers help ensure rapid resolution of issues or billing disputes.
Providers often bill more than is appropriate for the services they deliver, leading to excessive costs. When this occurs, self-insured clients rely on expert negotiators to secure discounts on out-of-network claims and when permitted, larger in-network claims.
The process begins with a careful review of each claim to identify errors or inconsistencies. Using published databases and proprietary historical data, negotiators establish a fair payment amount as the basis for discussions. Armed with this data, negotiators can engage providers directly to secure a signed agreement, ensuring the negotiated payment is accepted in full.
By integrating structured negotiation strategies into claims management, employers and payors can reduce financial waste, prevent excessive overpayments and achieve sustainable cost savings while maintaining objective and reasonable provider compensation.
Repricing PPO Networks: Lowering Costs on All Size Claims
Many providers have agreements with PPOs to accept discounts on their out-of-network claims. When negotiators are unable to secure agreements for discounts on large claims, payors access these PPOs to achieve reductions in the amount to pay the providers. Payors do the same for smaller claims.
Line-Item Bill Review: Identifying and Preventing Billing Errors
A comprehensive line-item bill review enhances accuracy, detects errors and minimizes unnecessary expenses. While most medical bills are accurate, errors in claims processing—such as data entry mistakes, incorrect billing codes and charges exceeding usual and customary (U&C) rates—can inflate costs and result in overpayments.
For large out-of-network claims and select in-network claims, employers and payors can request Line-Item Bill Reviews (LIR) to verify billing accuracy and ensure appropriate reimbursement rates. This process safeguards against financial waste by identifying errors and inconsistencies before payments are finalized.
LIRs are detailed audits conducted by experienced nurse coders and billing experts to detect:
- Duplicate charges for the same procedure.
- Improper modifiers that increase reimbursement rates incorrectly.
- Inflated medication or treatment costs due to incorrect quantities.
- Unbundled services billed separately instead of as a single package.
By flagging discrepancies, this review ensures fair and accurate provider payments while preventing unnecessary employer and payor expenses.
For out-of-network claims, bill reviews validate whether charges align with U&C rates for similar services in the same geographic area. Through detailed audits, payors can:
- Ensure charges reflect industry standards and prevent inflated costs.
- Identify unnecessary procedures that lack clinical justification.
- Support appeals and provider negotiations to correct billing errors before payment is finalized.
With healthcare claim costs rising, LIR offers a proven, data-driven method to eliminate waste, enhance financial oversight and ensure fair reimbursement practices. Integrating this process into claims management workflows helps reduce errors and improve plan performance.
By integrating negotiation strategies and data-driven decision-making, employers and payors can minimize disputes, reduce arbitration reliance and promote equitable payment resolutions – ultimately enhancing financial stability and operational efficiency.
Moving Forward: Strategies for Sustainable Cost Management
As healthcare costs continue to rise, claims negotiation, LIR and IDR have become essential tools for employers and payors looking to control expenses while maintaining financial stability. Implementing these strategies allows organizations to negotiate fair provider payments, reduce overcharges and eliminate unnecessary spending.
Billing accuracy through comprehensive audits helps prevent overpayments, ensuring that only valid claims are processed. Additionally, efficient dispute resolution mechanisms minimize delays and reduce financial uncertainty, allowing payors to manage complex claims with greater confidence.
A data-driven approach to claims management enables employers and payors to protect financial resources, maintain plan performance and promote equitable healthcare reimbursement. By leveraging expert negotiation, rigorous auditing and structured dispute resolution, organizations can navigate the challenges of rising healthcare costs while ensuring a cost-effective and sustainable approach to health plan management.
