The Rising Cost of Healthcare, Explained

For many employers, open enrollment season comes with a familiar question: why did our health insurance rates increase again?

We spoke with experts from UHA and Kaiser Permanente to better understand the factors that are contributing to the rise in healthcare rates across the United States.

Why are healthcare rates increasing?

There are three main layers that contribute to increasing healthcare costs for employers.

1. The healthcare market: Hospitals and physician prices, prescription drugs, medical technology, and healthcare labor costs have steadily increased. Hawai'i's geography, high cost of living, distinct labor market, and small market concentration make healthcare unusually expensive to deliver.

2. Healthcare utilization: Chronic conditions that require specialty treatment or high-cost specialty medications have become more prevalent. Additionally, the rise of telehealth has removed barriers and led to greater access and utilization of services, particularly in behavioral health.

3. Unique plan considerations: There are multiple factors within an employer's group health plan that influence rates such as the demographics of the group, number of enrolled employees/dependents, and claims experience (i.e. number of claims filed, their frequency and severity, and total claims cost). These individual factors are the reason why two employers with the same insurance carrier can receive significantly different renewal increases.

What can employers do?

Employers face a difficult reality: rising healthcare costs are not a challenge that can be eliminated simply by shopping for a lower-cost alternative. When costs are rising across the market, every carrier is facing many of the same pressures.

According to Valerie Wang at Kaiser Permanente (Executive Director & General Manager, Commercial Business, Hawai'i Market), because employer-sponsored coverage has been the norm for decades under the Hawai'i Prepaid Health Care Act, the conversation is often less about whether to offer benefits and more about how to get the greatest value from those benefits.

"Hawai'i employers aren't just buying insurance. They're investing in the health and productivity of their workforce."

– Valerie Wang, Kaiser Permanente

One common mistake to avoid is failing to thoroughly consider how benefit changes will impact your workforce. A competing carrier may offer a more attractive renewal, but employers should look beyond the premium alone.

While switching plans may deliver short-term savings, these decisions can lead to long-term challenges, including lower employee morale, higher turnover, and greater difficulty attracting and retaining talent.

According to UHA and Kaiser Permanente, one of the most effective strategies to manage healthcare cost is educating employees of their available benefits. This includes encouraging employees to seek preventative care, use wellness programs, Employee Assistance Programs (EAPs), and available paid-time off.

How can ALTRES help?

Professional Employer Organizations (PEO) like ALTRES work on your behalf to negotiate benefit rates, handle enrollments and employee questions, and keep your business compliant. To learn more about how ALTRES can simplify benefit administration, visit altres.com.

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