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Auto dealer health plans

April 16, 2025 · Authored by A. Michael Mader

The automotive industry faces numerous challenges, and one of the most pressing is the rising cost of healthcare insurance for employees. As healthcare costs continue to soar, auto dealer health plans must evolve to help manage these expenses while maintaining a positive workplace culture and ensuring employee retention.

In this month’s episode of Up to Speed, Mike Mader, principal with Baker Tilly’s dealership advisory service team, discusses strategies for controlling healthcare costs and enhancing employee benefits alongside Keith Lemer, CEO of WellNet Healthcare.

Understanding the healthcare cost challenge

Healthcare costs are projected to reach $6.8 trillion by 2030, representing a 43% increase from 2022. This significant rise in expenses poses a substantial burden on businesses, including automotive dealerships. Managing these costs requires creativity and discipline, particularly in areas such as floor plan interest, payroll, advertising and employee benefits. Among these, healthcare insurance stands out as a major expense that often seems uncontrollable.

The reality of the healthcare system

Contrary to the belief that the healthcare system is broken, it functions effectively for those who designed it to maintain revenue streams. Insurance carriers, pharmacy benefit managers and consultants benefit from the system, as their earnings increase with higher healthcare spending. This setup does not incentivize cost containment, leaving businesses to bear the brunt of rising premiums.

The importance of self-insurance

For many dealerships, self-insurance offers a viable solution to manage healthcare costs. Self-insurance provides transparency, data and analytics, enabling businesses to identify inefficiencies and implement cost-saving measures. By taking an active role in managing their health plans, dealerships can achieve significant savings and improve their overall financial health.

Strategies for cost containment

Big savings for your dealership can come from being proactive instead of reactive.

1. Educating employees: One effective strategy is to educate employees about their healthcare options. For instance, informing employees about lower-cost providers for procedures can lead to substantial savings. By waiving deductibles for choosing cost-effective options, both employers and employees benefit financially.
2. Medicare transition: Encouraging eligible employees to transition to Medicare can also reduce costs. Through education and guidance, dealerships can help employees understand the benefits of Medicare plans, which may offer comparable or better coverage at a lower cost.
3. Dialysis carve-out networks: Utilizing specialized networks for high-cost treatments like dialysis can significantly reduce expenses. These networks offer the same quality of care at a fraction of the cost, providing substantial savings for self-insured plans.
4. Prescription drug management: By sourcing medications differently, dealerships can reduce expenses on high-cost drugs like Humira, achieving significant savings.

Building a strong workplace culture

A proactive approach to healthcare management not only reduces costs but also enhances workplace culture. By sharing savings with employees, such as waiving contributions during profitable years, dealerships can foster loyalty and improve retention. Employees who feel valued and see tangible benefits from cost-saving measures are more likely to stay with the company and contribute to its success.

The role of leadership

Leadership plays a crucial role in the successful implementation of cost containment strategies. Dealerships executives must take an active interest in healthcare management, working closely with HR and advisors to explore and implement innovative solutions. By prioritizing healthcare cost management, leaders can ensure the long-term financial health of their business.

In an industry where every dollar counts, managing healthcare costs is essential for maintaining profitability and competitiveness. By adopting self-insurance, educating employees and implementing targeted cost-saving measures, dealerships can control healthcare expenses while fostering a positive workplace culture. This proactive approach not only benefits the bottom line, but also enhance employee satisfaction and retention, ultimately contributing to the overall success of the business.