The insurance benefit

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A new option for employer-reimbursed healthcare can help you keep your top performers

A hotel’s success hinges on its brand – and the brand is only as good as the people delivering the experience that defines it. The Great Resignation and the pandemic may be over, but that doesn’t mean high turnover rates have ceased to wreak havoc on hotel management across the country. This is only compounded by inflation and economic uncertainty.

The pain that turnover invokes is palpable. Not only is it disruptive to business operations when there isn’t adequate staffing; it contributes to burnout among employees who stay on and frustration from guests when the standard of service falls short. In addition, the cost of turnover is at an all-time high. The work it requires to replace an employee can be 75% to 200% of their annual salary. There are intangibles to consider here as well. According to the Society of Human Resources Management, lost productivity and institutional knowledge can amount to as much as two-thirds of the costs incurred from turnover. This goes beyond the hotel industry as turnover costs the U.S. economy upward of $1 trillion annually. Regardless, it’s adversely affecting the bottom line, and the brand, of hotels across the country.

Offering rich benefits is a proven way to boost recruitment and retention, but with health insurance costs jumping higher than ever in 2024, can the battered hotel industry afford to offer generous health benefits? Can they afford not to?

the insurance benefitFortunately, a new benefits solution, called individual coverage HRAs (ICHRA), allows hotels to reimburse their employees for health insurance rather than buying it for them. Employees simply purchase the individual health plan of their choice from Healthcare.gov or a state-based exchange and get reimbursed on their paycheck, tax-free. Personalized benefits alleviate many of the pain points hotel management faces today.

SIZED TO FIT
For small independent hotels, keeping up with compliance and regulations for health insurance without an HR department can be daunting and traditional group plans are cost prohibitive most of the time. Offering an ICHRA for health benefits helps keep valuable management-level employees happy and healthy while minimizing administrative burden and cost. With many job seekers today listing health insurance only behind salary as a motivator for taking a job, ICHRAs are an effective recruitment and retention tool for hotels looking to step into offering benefits. With lean teams, owners of small hotels can effectively outsource benefits with ICHRAs, offering quick setup and less than an hour of actual administrative work each month. With an ICHRA, they simply set a monthly reimbursement budget that works for them.

For Pritesh Patel, who owns several small hotels in the Midwest – including Indianola, IA-based Hotel Pommier – ICHRA was the answer to his turnover challenge. Wearing many hats, Patel oversees management of his various properties in addition to more intricate functions like human resources and continuous employee training. With only 15 employees, Patel had researched different group health insurance plans to boost recruitment and retention. He was frustrated by the rigid design, complexities, and high costs. His reimbursement model, which he has offered for the past three years and integrates with his payroll provider, gave his management team unprecedented choice in their healthcare, minimized the administrative overhead, and helped his employees’ morale and productivity.

For larger hotel brands that are required by law to offer health insurance, ICHRA represents an off-ramp for traditional group health plans. The most common scenario we see is a hotel chain struggling to keep healthcare costs down as they face steep renewals year over year. They might also have multiple locations, which complicates group health insurance, or participation rate issues, a common problem for lower wage workers. On top of that, the most common strategy for keeping costs down is to actually increase employee contributions and shift more cost to workers – a move that’s always met with criticism. ICHRA allows these companies to exit the double-digit renewal game, with many large companies saving 30% right off the bat by switching from group health insurance. What’s more, ICHRA makes it easy to offer insurance to employees in various geographies and there’s no participation rates to worry about.

GROWTH CURVE
for larger hotel brandsFor Coury Hospitality, a fast-growing, Texas-based, lifestyle hotel brand with 14 locations, their group rates were facing a 20% premium increase – one of several years of premium hikes on their fully insured plan. The rising costs had reached a fever pitch and for Kim Dunbar, Coury Hospitality’s senior vice president of human resources, it was time to make a change. She’d been in the fully insured market long enough to know employers have very little control over their future and their benefits budget.

With plans to double their employee size to 2,500 by 2026, they needed a scalable solution. For their diverse employee population comprised of many different roles across many locations, Coury also needed a benefits solution that could be tailored to each employee.

A fan of the ICHRA model, Dunbar shares, “For any CHRO or CFO, you simply can’t ignore the math.” Ultimately saving $1.1 million by switching to ICHRA, it represented 60% in company savings and 40% in employee savings – a true win-win.

No matter the size, an ICHRA caters to all types of employees, from seasonal to part time to hourly to salaried – all of which can be offered health insurance through an ICHRA. That’s something hard to do with traditional group health insurance.

For these reasons, the hotel industry is one of the early adapters of individual coverage HRAs and a trendsetter for the greater hospitality sector. For an industry that has one of the highest turnover rates, this new benefits model allows hotels to boost their recruitment and retention, take care of their trusted team, control costs and administrative burden, and focus on building and bolstering their brand.


jack hooper

Jack Hooper is the CEO and co-founder of Take Command, a technology company dedicated to helping employers provide modern, personalized benefits to their employees while taking command of their insurance costs through built-in cost controls. He is a graduate of the Wharton School of Business and has been featured in The New York Times, Dallas Morning News, Bloomberg, and more. His motto? “Health insurance was never meant to be this complicated.”


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