According to Hawaii’s Prepaid Health Care Act, employers are mandated to provide health insurance for their employees, working more than 20 hours per week for four or more consecutive weeks.
Employees often prioritize benefits when choosing a position, including the health insurance their employer can offer. Unfortunately, local businesses are being pressured by rising health plan premiums and increasing prescription drug costs to shop for lower rates. Due to the Prepaid Health Care Act, Hawaii employers are forced to shop for lower costs.
With the right group health insurance solutions, affordable employee benefits are achievable without sacrificing employee satisfaction. This guide offers strategies HR professionals and business owners can use to find group health plans, alternatives to traditional insurance solutions, and employee wellness programs.
Understanding the Factors Behind Rising Group Health Costs
National changes in health insurance costs, including the costs of certain medications, are driving cost pressures for employers in Hawaiʻi. However, there are also region-specific causes adding even more pressure to their situation, resulting in a difficult balance between benefits and profit margins. For many businesses, the current costs are unsustainable, making health insurance alternatives a necessity.
In 2026, Hawaiʻi’s employers in 2026 will see the highest health insurance cost increase in 15 years (6.5%). Several factors contribute to this, including the recent 25.75% increase in inter-island freight transport.
Other factors are impacting businesses locally and nationwide, such as the volatile cost of GLP-1 agonists, which are medications used for weight loss and diabetes management. Many employees expect coverage for these medications, despite their rising costs, leading 19% of large organizations (200+ workers) to offer benefits coverage for them, despite 64% reporting moderate or higher medication spending increases due to these drugs.
Assessing Current Health Insurance Plans
To address these and other cost factors, HR professionals conduct regular reviews of existing plans and coverage. When choosing a group health plan, business leaders weigh a variety of factors, including employee expectations, tax benefits, and premiums. Recently, employers have been introducing alternative funding options to deliver the benefits their employees expect.
Exploring Alternative Healthcare Funding Options
While traditional group plans used to offer predictability, yearly changes in coverage costs, provider rates, and employee expectations now indicate a need for alternatives, including self-funded health plans.
In self-funded plans, the employer acts in the role of the insurance company, providing the healthcare funds and the coverage restrictions. The main benefit of self-funded plans is that, in the absence of fixed plan premiums to an insurer, employers can offer more personalized benefits. For example:
- Health Reimbursement Arrangements (HRAs) are employer-funded plans set up to pay for medical expenses that employers deem as eligible.
- Flexible Spending Accounts (FSAs) have set contribution limits and can be funded by employers, employees, or a combination.
Both options provide flexibility and tax advantages, but their value to an organization depends on the employer’s goals. The benefits of plan customization and cost control come with a cost of their own. Since the employer funds health expense coverage in these situations, they also assume more financial risk in comparison to insurer-provided plans.
Implementing Employee Wellness Programs
Employees care about health and wellness programs. According to recent studies, 87% of employees would consider leaving an organization if the benefits offered did not focus on improving their well-being. The study also found that employees who reported that their organization cared about their well-being were 1.3 times more likely to stay loyal to the company, and 1.2 times more likely to be productive.
Employee retention is one of the reasons why, according to the most recent data from KFF, 83% of large firms offer at least one major employee wellness program aimed at lifestyle changes, including behavioral coaching, smoking cessation, and weight loss.
These and similar programs can improve employee satisfaction while reducing healthcare utilization, saving on healthcare costs in the process.
Negotiating With Insurance Providers
Choosing the right health insurance alternative is only the first step toward addressing rising health insurance costs. Business leaders who build strong relationships with insurance providers can be positioned to negotiate better rates, clarify their contract terms, and access more strategic insurance options.
Keep these tips in mind to improve your organization’s position:
- Begin negotiations at least 3 months before contract renewal to gather data and form a strong position.
- Obtain data related to strong employee outcomes for coverage standards and insurance cost benchmarks in Hawaiʻi.
- Use supporting evidence to form a clear proposal.
- Prepare to improve employee wellness, on-site safety, and compliance records to strengthen your position.
- Consult local insurance brokers familiar with the regulations in Hawaiʻi for strategic help when preparing for negotiations with plan providers.
Staying Compliant With Regulations
Business leaders customize their plans to meet the needs of their workforces, but certain regulations in Hawaiʻi require minimum coverage amounts. For example, the Hawaiʻi PHC Act requires health care coverage for any employees working at least 20 hours per week, including medical coverage for injuries and illnesses not related to their work.
To satisfy state regulations, business leaders may self-fund an insurance plan for maximum flexibility or use an insurance provider to streamline the process. However, managing costs while ensuring compliance can be difficult, which is why an experienced local insurance broker is your organization’s best resource for guidance and strategic benefits planning.
Partner With Local Insurance Professionals to Improve Benefits
At Atlas Insurance Agency, A Marsh Agency LLC Company, our team of experienced brokers helps employers, HR professionals, and decision-makers in Hawaiʻi adapt to rising group health plan costs. Our professionals help employers assess their current health insurance plans and consider innovative alternatives, including self-funded health plans, to provide employees with the benefits they need while addressing rising premiums.
Contact our team today and schedule a health insurance cost management consultation to learn more about how our professionals help businesses find affordable employee benefits plans in Hawaiʻi, even amidst rising health insurance costs.