When someone asks me what I do for a living, I like to paint a vivid picture. I roll up to my office in a well-worn pickup truck and help businesses regain control of the ever-growing, uncontrollable costs of healthcare. As a partner to over 200 dealerships, I empower auto dealerships to rethink their healthcare strategies and achieve lasting financial stability.

Healthcare is an ecosystem riddled with misaligned financial incentives. PwC estimates that this year, employers will face an 8% increase in health plan costs, putting immense financial strain on businesses. Many employers, particularly those in the auto industry, feel trapped by skyrocketing healthcare expenses. But I’m here to tell them it doesn’t have to be this way. By embracing a different approach to health plan selection, they can regain control.

The Biggest Challenges Employers Face

For many businesses, employee benefits have become their second-largest expense behind salaries, and unfortunately, that trend shows no sign of reversing. In the auto industry, there are three major challenges driving uncertainty this year: escalating costs, retention, and tariffs. 

First, rising healthcare costs are forcing employees into high-deductible health plans, a model many simply can’t afford. KFF reports that in the state of Virginia, the average single deductible in 2023 was $1,752, and families averaged $3,189. These high costs, along with the likelihood of incurring thousands of dollars in additional out-of-pocket expenses, often cause employees to forgo necessary preventative care. Without proper care, employees are not only unhealthy but also more likely to miss work or underperform, impacting both their well-being and the company’s productivity.

This year dealerships will face additional pressure due to a new 25% tariff on imported vehicles. According to CNN, eight million new cars were imported in 2024. With rising vehicle prices, dealerships are likely to see their sales margins shrink, further tightening their budgets. 

On top of that, employee turnover remains a persistent issue in the auto industry, with some dealerships facing turnover rates as high as 46%, according to JM&A Group. In a business with tight profit margins, effectively controlling healthcare costs is more crucial than ever for long-term sustainability.

A Strategic Approach to Cost Containment

Healthcare should be the first area employers address when looking to control rising expenses. Unlike other business costs, healthcare spending often lacks transparency, leaving employers with little insight into where their money is going. However, this creates an opportunity for employers to take a proactive approach. 

By reducing healthcare costs by 20%, potentially millions of dollars, dealerships can significantly improve their bottom lines, giving them more flexibility to invest in growth and employee benefits. Forward-thinking dealerships are shifting their focus to employee retention by offering better benefits and a more competitive workplace to stand out.

To achieve these savings, car dealers should work with consultants who act as true partners – those who sit on the same side of the table and bring innovative cost-cutting strategies to the conversation. Consultants who present only standard, unaffordable options from traditional insurance carriers are not a good fit. A consultant’s compensation should be tied to performance, with an emphasis on driving measurable outcomes that align with the dealership’s business goals.

Finally, data matters. Analyzing inpatient and outpatient utilization trends helps identify key cost drivers. Employers must dig into chronic condition data to determine whether investments in wellness programs, direct primary care, or other targeted solutions will deliver better results.

The Cost-Saving Levers

I break cost-saving strategies into four key areas: healthcare payment models, pharmacy cost reduction, care coordination, and medical reimbursement strategies. Together, the levers offer a comprehensive approach to lowering costs without compromising the quality of care.

1. Healthcare payment models: Self-funded, fully insured, and captive plans each offer unique advantages. Self-funding gives employers more control and transparency, while captives allow smaller groups to share risk and reduce volatility.

2. Pharmacy cost reduction: Specialty drug costs are climbing fast. Renegotiating pharmacy benefit manager contracts, carving out specialty drugs, or using transparent pass-through pricing can lead to major savings.

3. Care coordination: Guiding employees to high-quality, lower-cost providers helps avoid unnecessary procedures and drives better outcomes. Navigation tools and concierge support can make a big difference.

4. Medical reimbursement strategies: Traditional PPO contracts are often the most expensive way to pay for healthcare. Alternative approaches include narrow networks, cash pricing, and Medicare-based benchmarking. These alternatives can yield significant savings.

By strategically leveraging these four areas, businesses can unlock substantial savings without compromising on the care their employees receive. The key is to take a comprehensive, proactive approach that doesn’t rely on one-size-fits-all solutions. These levers, when combined with the right consulting partner and a data-driven mindset, allow businesses to maintain high-quality benefits, improve employee satisfaction, and enhance their financial stability.

A Car Dealership’s Success Story

These strategies don’t sound good just on paper. They are being successfully applied by car dealerships around the country. 

When a 500-employee dealership implemented the strategies, it lowered employee deductibles from $5,000 to $0. Over four years, healthcare costs remained stable, with no increases in premiums or out-of-pocket expenses. Employee contributions were reduced by 50%, and individual coverage dropped to an affordable $50 per month. Family plans were slashed from $1,600 to $800 per month.

These savings not only made healthcare significantly more affordable for employees, improving recruiting and retention, it also cut costs for the business. By stabilizing the dealership’s healthcare costs, space was created for reinvestment in both business growth and enhanced employee benefits. 

The success story highlights the power of targeted healthcare solutions in an industry traditionally plagued by high costs and low margins. With the right approach, dealerships can break free from the grip of rising healthcare expenses, making meaningful investments in their workforces and their futures. The result is a healthier bottom line and a more engaged, satisfied employee base, positioning the business for long-term success.

Colin Royster is managing director at The Hilb Group, where he partners with over 200 auto dealerships to tackle rising healthcare costs. 

EDITOR’S NOTE: This article was authored and edited according to F&I and Showroom editorial standards and style. Opinions expressed may not reflect that of the publication.