Healthcare costs are rising across the country, but Indiana employers are feeling the pressure more than their neighbors. If you’re wondering why your costs keep going up while surrounding states manage to keep expenses lower, you’re not alone.
Understanding why Indiana healthcare costs are higher helps employers make informed decisions about their health plans and identify opportunities to control spending.
In this article, we’ll explain the factors driving Indiana’s higher healthcare costs and what businesses can do to take back control.
What’s Driving Higher Healthcare Costs in Indiana?
Indiana businesses are facing healthcare costs that are 10-20% higher than those in neighboring states. Several factors are contributing to this problem, and they’re not likely to resolve on their own.
Many of the causes are rooted in long-standing industry practices and systemic challenges. To make meaningful changes, employers need to understand the key factors driving these inflated costs. Knowing these facts puts you in a stronger position to make informed decisions about your healthcare strategy.
The most significant drivers include:
- Hospital System Consolidation: A few large health systems control most of the hospitals and clinics in Indiana. Less competition means these systems have greater control over prices for services.
- Two Major Insurance Carriers Control the Market: Indiana’s employer-sponsored healthcare market is dominated by just two major insurance carriers. This lack of competition limits employer options, weakens bargaining power, and contributes to higher premiums and administrative costs. Without alternative choices, businesses are left with few ways to negotiate better coverage or reduce expenses.
- Higher Prices for Common Procedures: Indiana employers routinely pay more for common procedures compared to surrounding states. For example, an MRI or a joint replacement can cost thousands more in Indiana than in Illinois, Michigan, or Ohio.
- Lack of Price Transparency: Many providers and insurance carriers in Indiana offer little transparency into how prices are set or what employers are actually paying. This makes it harder for businesses to negotiate better deals or hold providers accountable.
- Inefficient Insurance Models: Traditional, fully insured health plans often come with inherent fees, administrative costs, and markups that drive up overall spending. Many Indiana employers are still tied to these outdated models.
When these factors are left unaddressed, healthcare expenses continue to climb, leaving employers with few choices but to absorb the costs or pass them on to employees. Recognizing these dynamics is the first step toward breaking the cycle and regaining control.
How Higher Healthcare Costs Impact Indiana Employers
When healthcare costs are higher, Indiana businesses pay the price—not just financially, but operationally as well. The strain extends beyond benefits budgets and affects the company’s ability to attract talent, offer raises, and remain competitive.
These rising costs force many employers to make difficult decisions about reducing benefits, limiting wage increases, or scaling back growth initiatives. Understanding these consequences highlights why addressing healthcare spending must become a strategic priority.
Here’s how higher Indiana healthcare costs becomes a direct problem for you:
- Higher Premiums and Deductibles: Employers end up shifting more of the cost burden to employees through higher premiums, deductibles, and out-of-pocket expenses.
- Stagnant Wage Growth: Money that could be used for salary increases, bonuses, or investments in workforce development is diverted to cover healthcare expenses.
- Employee Turnover and Dissatisfaction: As employees take on more healthcare costs, satisfaction with benefits decreases. Frustration with limited coverage or high out-of-pocket costs can lead to higher turnover.
- Competitive Disadvantage: Companies in neighboring states may offer better benefits packages at a lower cost, making it harder for Indiana employers to compete for top talent.
These challenges undermine your ability to grow and maintain a stable workforce. Businesses that address healthcare costs head-on are better positioned to offer competitive compensation, retain top talent, and protect their margins. Failing to act may leave your company at a disadvantage as competitors offer more attractive benefits packages.
What Indiana Employers Can Do to Lower Healthcare Costs
Indiana employers are not powerless. Businesses that break away from traditional insurance models and demand more control are seeing 15-30% savings while offering better benefits.
Taking the first step may seem daunting, but proactive strategies can create immediate and long-term improvements. These approaches are already helping forward-thinking employers regain control over healthcare spending and deliver more value to their teams.
1. Move to a Self-Funded Health Plan
Self-funding allows you to pay only for the healthcare your employees actually use. It eliminates the guesswork and markups associated with fully insured plans.
This approach puts employers back in the driver’s seat, offering flexibility to design plans tailored to their workforce and budget. You can avoid unnecessary expenses and redirect those resources toward higher-value initiatives—as well as:
- Gain full transparency into claims and spending.
- Avoid unnecessary administrative fees and hidden costs.
- Customize your plan to meet the specific needs of your workforce.
Employers who make the shift to self-funding often see immediate savings and improved plan performance over time. It’s a proven strategy to regain control and reduce unnecessary expenses while improving employee confidence in their health coverage. By aligning your healthcare plan with your business objectives, you build a stronger, more resilient organization.
2. Direct Contracting with Healthcare Providers
By negotiating directly with hospitals and providers, you can lock in fair, transparent prices and be better informed than a fully insured carrier model.
This method helps eliminate middlemen and ensures that you’re getting quality care at predictable, negotiated rates. It also fosters closer relationships with providers who are committed to delivering better outcomes for your employees. You’ll be able to:
- Establish fixed pricing for common procedures and services.
- Build relationships with high-quality providers.
- Offer employees better access to affordable, reliable care.
Direct contracting works because it removes unnecessary layers and gives employers more control over both costs and quality. Many businesses report significant cost reductions and improved employee satisfaction with their healthcare experience. Taking this approach sends a clear message to your employees that you are invested in their health and well-being.
3. Demand Transparency and Accountability
Employers must hold vendors, insurance carriers, and healthcare providers accountable.
When you insist on full disclosure and clarity, you eliminate hidden fees and ensure that your company’s healthcare dollars are spent effectively. Transparency leads to better decision-making and more predictable costs. Ensure cost-effective healthcare spending with these transparency strategies:
- Require clear, detailed reporting on claims and costs.
- Benchmark prices to ensure fairness and value.
- Push for full disclosure on fees and contractual arrangements.
Transparency empowers you to make smarter decisions, protect your budget, and deliver better healthcare outcomes for your team. Businesses that prioritize accountability are often able to identify hidden inefficiencies and reduce unnecessary spending.
Why Indiana healthcare costs are higher is a complex issue, but employers are not stuck with the status quo. Businesses that take proactive steps now can lower costs, improve benefits, and build a stronger, more competitive organization.
Indiana companies that challenge traditional models, demand transparency, and explore innovative solutions are seeing meaningful results. Controlling healthcare spending gives you the flexibility to invest in your workforce, improve retention, and grow your business.
Employers who continue to accept high healthcare costs without challenging the system risk falling behind. Those who act now will be better equipped to offer competitive compensation, retain their best employees, and create lasting financial stability.
Ready to take control of healthcare costs and keep your workforce strong? Download our free guide, "The Employer’s Guide to Fixing Indiana’s Broken Healthcare System," and explore how leading Indiana businesses are doing it.
Please let us know if you have any questions. We understand that local companies have unique needs that most national firms don’t consider or struggle to identify. This leaves your people with a less effective, one-size-fits-all benefits plan. However, our ability to cater to the needs of our clients comes from decades of client partnerships. This perspective allows us to fully address unique needs and generate creative benefits plans.
You shouldn’t have to worry about just being a number, offering a generic plan, or getting the unique support you need. Call us today.
This Benefits Insights is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice.