Regaining Control of Runaway Benefits Costs

HUB Insurance Robert Fiorito

How a successful company in the hospitality industry contained benefits spend by creating a culture of consumerism

Due to historically high claims and low employee engagement, a successful company in the hospitality industry (which we will call “Company A” for the purpose of this article) experienced a double-digit increase to their medical premiums. It was imperative that they control costs and transition to a culture of consumerism that would give employees more influence over their benefits choices and spending. They hoped this shift would make them more competitive at recruiting and retaining employees as well.

“Company A” employs 3,000 (and provides benefits for 1,500 non-union workers) across 11 states. It needed assistance after working with large brokerages that didn’t understand their mid-size company needs.

The first order of business was to move the company to a self-funded insurance model, which they estimate saved them $1.3 million in the first year. This first change

  • the demographics behind the organization’s benefits expenditure
  • the medical services most utilized
  • the medical services that were underutilized
  • the groups of employees who generated the majority of claims

“We came to the conclusion that we had a lot of employees that virtually didn’t touch the plan and a few employees that were really sick. The large claims were really driving the expenses – 90 percent of costs were incurred by five percent of employees,” said their VP of Employee Benefits. “This told us that adding copays and changing employee contributions wasn’t going to do much to change how employees access medical care. We worked on a different approach – to drive employees to make better decisions about the services, providers, and facilities they’re using–leading to quality outcomes–which ultimately would help mitigate some of the costs.”

Hotelex/UBM January 2019 728×90

“Company A” switched their medical network saving them an additional $320,000. They rolled out a new high deductible health savings account (HSA) plan. They continued their drive toward consumerism with the rollout of an additional HSA plan in 2015.

  • With about 40% of the deductible contributed by the company, both plans allow employees to accrue funds for their health care expenses and become more conscientious consumers of their own health care.
  • Initial cost containment strategies saved “Company A” over $1.6 million within the first two plan years.
  • Enrollment in the consumer-directed health plan (CDHP) increased to 67% with the addition of the HSA offerings.
  • Employee contributions were eventually cut by 20% and out-of-pocket limits were reduced, making the company’s benefits more competitive and further solidifying employee engagement.

Just about every plan change has been received very well. The employees have been appreciative that contributions have not increased since 2011. Response to the other initiatives has been positive as well. The multi-year plan framework shouldn’t be underestimated in achieving cost containment and employee engagement success. Additionally, the newfound focus on consumerism led “Company A” to the integration of multiple employee benefits and cost containment strategies that have successfully driven employee engagement over time.

Due to the convergence of rising health care costs, employee needs, and health care reform compliance, the story of “Company A” is significant, but unfortunately, not unique. Restaurant and food service companies such as this and yours should proactively work with their broker and look into their employee benefits package to focus more on consumerism, drive down costs and increase employee engagement.

Robert Fiorito
Robert Fiorito serves as Vice President with HUB International Northeast, a leading global insurance brokerage, where he specializes in providing insurance services to the restaurant industry. As a 25-year veteran and former restaurateur himself, Bob has worked with a wide array of restaurant and food service businesses, ranging from fast-food chains to upscale, “white tablecloth" dining establishments. Robert can be reached at 212-338-2324 or by email at For more information on HUB, please visit