Finding Balance: Controlling Rising Healthcare Costs While Attracting Top Talent in Hawaii

Tips for getting the most of your healthcare offering to manage cost and recruitment & retention goals.

Health insurance costs are squeezing employers across the U.S., especially in Hawaii, where employer-sponsored health insurance is mandatory for businesses of all sizes, according to state law. But health insurance is one of the top benefits employees look for when making employment decisions. What should local businesses do? How should employers balance rising healthcare costs amidst talent pressures? In this blog post, we look at market and workforce trends affecting both rising healthcare costs and persistent attraction and retention challenges in Hawaii and discuss how employers can make the most of their healthcare offering to balance both concerns. 

Healthcare costs grow for employers

The burden of healthcare costs for employers in Hawaii has been steadily increasing over the past decade. According to a study by the Kaiser Family Foundation in 2022, employer premiums for employee health plans have increased by more than $225 per year for single coverage and $700 per year for family coverage. These rising premium costs have outpaced both inflation and wage growth, presenting significant challenges for businesses and employees alike. 

Today, Hawaii employers face an average cost of $6,300 per employee for single coverage and over $20,400 for family coverage per year. These figures surpass Zippia’s national average cost for single ($6,200) and family ($15,700) health plans. Overall, health insurance has become the most expensive employer-sponsored cost for businesses in Hawaii, excluding wages and salary, followed by FICA (social security and Medicare taxes), SUTA (state unemployment taxes), and workers' compensation insurance. 

According to Aflac’s 2023 Workplace Benefits Report, 72% of employers said benefits costs have increased in the last year, a significant uptick from 2021. Several factors contribute to this cost growth. These factors include the rising cost of prescription drugs, increased utilization of medical care due to delayed health needs during the pandemic (a.ka. the COVID-19 hangover), and an upsurge in mental health issues and chronic illnesses. These trends have resulted in deteriorating health conditions and higher utilization rates, ultimately impacting healthcare costs. And it will not stop here. Experts predict that faster cost growth in 2024 and beyond is likely as employers have yet to feel the full impact of inflation-driven cost increases.

Attracting & retaining employees hasn't gotten easier

While grappling with escalating healthcare costs, Hawaii employers also face the ongoing challenge of attracting and retaining top talent. Despite the rising costs, the talent market remains highly competitive. Employers are acutely aware that their employee benefits packages play a crucial role in their ability to recruit and retain skilled professionals. According to Hawaii Business magazine's BOSS Survey, only 7% of business leaders reported that hiring has become easier compared to pre-pandemic times. In a separate study, Aflac's 2023 Workforce report revealed that 58% of surveyed employers expressed concerns about employees accepting job offers with lower pay but more comprehensive benefits—a significant increase from 31% in 2019.

To stay competitive in the war for talent, many companies have opted to enhance their health insurance plans or increase employer contributions to improve their recruiting and retention efforts, rather than resorting to cost-cutting measures. In fact, Hawaii Business magazine's 2023 Best Places to Work list revealed that 22% of listed companies now offer health insurance to employees from day one of employment, exceeding the eligibility requirements of first working 20+ hours for four consecutive weeks as stipulated by the HPHCA. Moreover, 25% of these companies cover at least 75% of dependents' health insurance costs—an expense not mandated by the HPHCA.

It is important to note that absorbing higher healthcare costs may only be feasible for larger businesses, given their greater financial resources. Nonetheless, these efforts demonstrate the lengths to which some companies are willing to go in order to strike a balance between labor costs and recruitment and retention concerns.

Getting the most out of your healthcare offering

In today's dynamic work environment, it is essential to provide healthcare packages that not only meet the needs of your team but also contribute to the success of your business. Whether your primary focus is attracting and retaining top talent or reducing labor costs, there are several strategies and customizations you can employ to make progress towards your goals. 

As you approach your healthcare open enrollment period, consider implementing the following strategies that are particularly relevant for employers in Hawaii.

1. Tailor benefits to different workers

By creating different benefit levels or tiers with varying cost-sharing options, you can strategically manage health insurance costs and target recruitment and retention efforts for specific employee groups. For example, you might enhance employee benefits for individuals with longer tenures while scaling back for new hires. Alternatively, you could differentiate benefits based on job titles, offering different levels of coverage for managers or leaders versus front-line workers. It is crucial to base these distinctions on employment job classifications rather than discriminatory factors. Consider factors such as job title, tenure with the company, full-time or part-time status, and in-state versus out-of-state employees when customizing benefit levels.

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2. Review employer & employee cost contributions

How much your business contributes toward healthcare premium costs is something you control and likely dependent on your strategy to attract and retain employees. However, if your business requires employees to contribute toward the cost of their healthcare premiums, that’s where HPHCA rules enter the picture. According to the law, employee contributions for single coverage can’t exceed certain limits, specifically the lesser of 50% of the coverage cost OR 1.5% of the employee’s monthly wages. Depending on your business situation, you can reassess the extent of employee cost sharing. This could involve expanding employer contributions to include dependent care premiums, or reinstate employee cost-sharing for single coverage if you previously removed it.

3. Understand employee needs and preferences

Take a close look at your company's healthcare plan design to identify areas where cost savings can be achieved without compromising the overall quality of coverage. To make informed decisions, it is essential to understand the needs and preferences of your workforce. Consider elements such as employee feedback and demographics to determine whether adjustments are necessary. For example, if you have a significant number of employees with families, ensure that your offering supports their specific needs. If you have employees on neighbor islands, consider how your plan options with various providers impact their access to care. For example, did you know that a physician group offering maternity care services in Maui just closed shop in early 2023? The impact of this closure means that the only OB docs on Maui are with Kaiser (see FAQs). If you have employees on Maui that might need these services now or in the future, you might consider offering both HMSA and Kaiser base plans to ensure your team has the most access to care. 

4. Educate employees about plans & benefits

Avoid the assumption that employees fully understand how health insurance works. According to a recent study, 55% of employees surveyed experienced stress when understanding what insurance or benefits they need. To alleviate this, provide educational support during open enrollment and throughout the year. Consider offering access to benefit consultants who can assist employees in understanding their options. Additionally, consider implementing workplace policies that allow employees to take paid time off to get their annual check-ups or other preventive routines, encouraging proactive health management which can reduce costs in the long run. 

5. Promote wellness & preventive care

Find ways to encourage employees to lead healthy lifestyles, then reward them. Investing in your employee's health and well-being can reduce the frequency and severity of medical interventions, leading to cost savings over time. A recent United Healthcare survey showed 67% of employees participating in company wellness plans reported weight loss, earlier disease detection, and reduced or eliminated nicotine use. And, a study reviewed by Society for HR Management showed that every dollar invested in a corporate wellness intervention could yield $6 in healthcare savings for employers.

6. Add voluntary benefits to your offering

Lastly, consider offering voluntary benefits as an extension of your healthcare offering. Voluntary benefits are additional coverage options that employees can enroll in at their own expense. These benefits include supplemental insurance like dental, life, or cancer insurance. It can also include flexible spending accounts (FSAs) or discounted gym memberships. By providing voluntary benefits, you allow employees to customize their coverage according to their needs without imposing significant costs on the company. This enhances the value of your healthcare package and demonstrates your commitment to supporting employee well-being and satisfaction.

In conclusion…

Rising healthcare costs in Hawaii require employers to take proactive measures to mitigate the financial strain and ensure the availability of high-quality coverage for their employees. By strategically designing benefit plans, customizing offerings, evaluating cost-sharing arrangements, and prioritizing employee wellness, employers can navigate the complexities of healthcare expenses while nurturing a productive and satisfied workforce. Remember, every organization's circumstances are unique, so it is essential to assess your specific business needs and consult with benefits professionals to develop a comprehensive approach that aligns with your goals.

Learn how ProService Hawaii helps thousands of local employers with their employee benefits. 

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