In the hospitality industry, where only 35% of employees have access to insurance through their employer, balancing company needs with employee welfare is more pressing than ever. With turnover rates ranging from 70% to 80%, operational stability is a distant goal. The cost of replacing an employee alone can range from 30% to 150% of their annual salary—a significant strain on any organization’s budget. Additionally, 100% of management in the hospitality sector faces budget challenges driven by seasonality, market fluctuations, and inflation.
Kampgrounds Enterprises, Inc. (KEI), a third-generation family business with a long history in the outdoor hospitality sector, found themselves at the crossroads of these challenges. Operating across Southern California, Northern Arizona, and the St. Louis area, KEI managed a workforce of 275 to 350 employees, whose numbers varied with the seasons.
As the company expanded across state lines, its traditional group health insurance plan increasingly failed to meet both employee needs and the company’s financial objectives.
This case study explores how KEI, with the support of Take Command, transitioned to an Individual Coverage Health Reimbursement Arrangement (ICHRA), achieving significant cost savings, improving employee satisfaction, and simplifying benefits administration—all while navigating the complex landscape of the hospitality industry.
The outdoor hospitality sector experienced significant growth post-COVID-19 as more people sought outdoor getaways. This surge intensified talent competition, making it crucial for businesses like KEI to offer competitive employee benefits, especially given the industry's seasonal nature and high turnover rates.
KEI’s group health insurance plan initially worked well for their localized workforce in California, providing comprehensive coverage. However, challenges arose as KEI expanded into Northern Arizona and the St. Louis area. The remote nature of these locations limited access to quality healthcare, leading to low participation rates and increasing employee dissatisfaction.
Managing a uniform health plan across multiple states became increasingly complex. The one-size-fits-all approach of the group plan couldn’t meet the diverse needs of KEI’s geographically dispersed workforce, negatively affecting employee satisfaction and complicating recruitment and retention efforts. The lack of appealing health benefits often deterred potential hires.
The COVID-19 pandemic exacerbated these issues. As demand for outdoor hospitality surged, KEI needed to expand its workforce quickly. However, their existing group health plan struggled to provide reliable benefits, particularly in remote areas. Declining participation rates added uncertainty about the plan’s sustainability, highlighting the urgent need for a more flexible and sustainable solution as KEI faced rising costs and administrative complexity.
KEI faced growing challenges in managing a traditional group health plan across its geographically dispersed workforce. After carefully evaluating their options, they identified ICHRA as the most effective solution to address their flexibility and financial stability needs.
Why ICHRA? ICHRA offered KEI the flexibility to tailor health plan options to the diverse needs of their employees across multiple states. This approach allowed employees to choose from various ACA-compliant plans, ensuring access to quality healthcare regardless of location. Additionally, ICHRA provided predictable budgeting by enabling KEI to set defined contributions for each employee’s benefits, eliminating the unpredictability and financial strain associated with their previous group plan.
With the decision, KEI partnered with Take Command to facilitate the transition. Take Command was crucial, offering comprehensive support that included employee education, onboarding guidance, and ensuring regulatory compliance.
With any big decision in benefits, change can be hard for the admin and the employees. In this case, the transition required KEI and Take Command to work in tandem to make it as smooth as possible. Together, they moved past the initial setup challenges and now have a smooth process with minimal disruption to KEI’s operations.
Implementation and Execution
KEI prioritized educating its employees about the new ICHRA model to ensure success. Take Command provided clear resources, including informational sessions and personalized support, which led to positive initial reactions. Employees appreciated the flexibility of choosing plans that best suited their needs.
Take Command also guided KEI through the administrative setup of ICHRA, including defining contribution amounts and ensuring compliance with ACA regulations. KEI customized its ICHRA offering to meet the needs of its full-time and seasonal employees, further enhancing the success of the transition by catering to its varied workforce.
Challenges and Solutions
During the implementation, some employees expressed concerns about transitioning from a traditional group plan to ICHRA due to unfamiliarity with the new system. KEI and Take Command addressed these concerns through targeted communication, emphasizing the benefits of personalized plan choices and providing ongoing support.
KEI also encountered technical and administrative challenges, such as integrating ICHRA with existing HR processes and managing logistics across multiple states. Take Command provided customized tools and guidance to overcome these hurdles, ensuring a smooth and successful implementation.
KEI’s decision to transition from a traditional group health plan to an ICHRA brought substantial benefits across various aspects of its business.
The transition to ICHRA has not only streamlined our administrative processes but also significantly improved our employees’ satisfaction. The flexibility in choosing their own health plans has made a noticeable difference, especially for our younger staff members.
By adopting ICHRA, KEI reduced healthcare costs by 30%. This shift provided better control over the company's benefits budget, as KEI could set defined contributions for each employee’s health benefits. The cost savings were strategically reinvested into the company, allowing for enhanced employee training programs and improvements to operational infrastructure, further strengthening KEI’s overall business.
Following the ICHRA implementation, KEI observed a marked increase in employee satisfaction. Although specific survey data isn’t available, anecdotal feedback indicated that employees, particularly younger ones, appreciated the ability to select healthcare plans that aligned with their personal needs. This flexibility and customization fostered a more engaged and motivated workforce.
The modernized benefits package positively impacted recruitment and retention, helping KEI attract a broader talent pool, including tech-savvy younger workers. Improved retention rates reflected employees' greater loyalty to a company, which empowered them to choose healthcare solutions.
The transition to ICHRA also resulted in substantial time savings for KEI’s HR team. The streamlined administrative process, facilitated by Take Command’s ongoing support, allowed HR to focus on strategic initiatives rather than the complexities of managing a group health plan. With Take Command handling compliance, reporting, and employee assistance, KEI experienced increased operational efficiency and reduced administrative burdens.