From Complexity to Clarity: A Path to Value in Employer Health Plans

Am J Manag Care. 2025;31(Spec. No. 15):e2-e3

The Elusive Value Proposition in Health Care for Employers

Employers continue to invest significant resources in health benefits, yet the return on that investment is often difficult to define. Unlike other areas of business where value is measured in clear outcomes, health care spending is marked by complexity, limited transparency, and incentives that do not always align with employer goals. The central challenge is ensuring that every dollar contributes to healthier employees, greater productivity, and sustainable costs. For all organizations, whether self-insured or fully insured, this requires shifting from a traditional purchasing role to actively shaping benefits that deliver measurable value.

Transparency and Measurement

Employers often lack visibility into where their health care dollars are going and how those dollars translate into outcomes. Much of this stems from the sheer complexity of self-funding and the system as a whole. A maze of vendors, competing incentives, and fragmented processes makes it difficult to measure what’s actually being achieved. As costs rise, employers are left questioning whether their investment is improving employee health, managing long-term expenses, or driving productivity. The challenge is cutting through that complexity, bringing greater alignment, transparency, and accountability so that value can be clearly defined.

Misaligned Incentives

Misaligned incentives remain one of the most fundamental challenges in health care. Most employers and providers still operate in a fee-for-service environment, where revenue depends on higher utilization or unit costs. This structure drives costs upward rather than rewarding outcomes. At the same time, employers often rely on consultants or brokers to help navigate self-funding—yet many of these advisers have financial ties to large insurance companies. In some cases, their compensation is tied directly to premiums, meaning they earn more when costs increase. Similar issues exist across other players: Third-party administrators (TPAs) may grow revenue by charging per-script fees or retaining a share of “savings,” whereas pharmacy benefit managers often rely on spread pricing and rebates that don’t always return to the employer. These models put employers at a disadvantage, making it difficult to access transparent solutions that truly reduce costs.

Employee Experience vs Employer Value

Even when employers pursue new strategies, they often face barriers inside their own organizations. Change is difficult, and it can be disruptive—not exactly appealing for human resources teams tasked with stability. The saying “No one ever got fired for going with Blue Cross” captures why so many stick with the status quo: It feels safe, and employees know what to expect. But moving to a new network, narrowing provider options, or introducing a TPA creates disruption, which can make employers hesitant to act. Yet for those willing to lean into change, the rewards are meaningful: better alignment between costs and outcomes, improved transparency, and a path to long-term sustainability.

Possible Paths Forward

Engage transparent, outcome-aligned advisers. Employers should work with consultants who commit to transparency and tie their compensation to measurable outcomes. Advisers must ensure vendor contracts reflect employer goals, not hidden incentives. Realignment should start with the broker relationship and extend across every vendor.

For example, instead of paying a broker a percentage of premium, an employer might structure a flat per-employee per-month consulting fee plus a bonus tied to lowering the total cost of care year over year. This ensures the adviser is rewarded for savings rather than rising costs.

Restructure incentives across the value chain. Solving misaligned incentives requires new contracting models. Some employers are turning to administrative partners and TPAs that structure agreements to reward efficiency and value rather than volume. There is also an opportunity to extend this principle to providers, with reimbursement tied not just to services delivered but also to outcomes achieved. Value-based arrangements that connect provider performance to the total cost of care—covering both quality and affordability—offer a more sustainable path forward.

For example, a provider contract could replace or supplement a lower fee-for-service arrangement with a reimbursement structure that uses a per-member per-month methodology tied directly to lowering the total cost of care. This shifts incentives toward managing utilization, improving outcomes, and avoiding unnecessary costs.

Take an incremental, employee-centered approach. Change does not need to happen all at once. Employers can start by moving to a self-funded platform while maintaining familiar plan designs and provider access to minimize disruption. From there, a 3- to 5-year road map allows gradual integration of value-driven strategies. The key is transparency with employees: setting expectations early, communicating clearly, and providing consistent education to build trust and reduce confusion.

For example, an employer moving off a fully insured plan began with a self-funded arrangement that kept the same providers in network to avoid disruption. In year 2, it introduced a high-value tier 1 option with lower out-of-pocket costs, followed in later years by plan design changes tied to choosing higher value providers. Each step was paired with targeted employee education to help staff understand the “why” behind the change.

Closing Thought

The path forward isn’t about finding the perfect solution overnight; it’s about employers taking deliberate steps to demand transparency, realign incentives, and make change manageable for their workforce. Those who do will turn health benefits from a cost center into a measurable investment in their people and business.

Author Information

Mr Leitzen is CEO of Unified Health Plan and ProviDRs Care.