Employee Benefits 2025

Summary

Amid political, economic, environmental, and global disruption this year, two overarching trends emerged as primary contributors to the soaring costs for employer-sponsored health insurance: more large medical claims and more expensive prescriptions.

Not only did the number of million-dollar claims rise eight percent in 2024, but 87 percent of employers were likely to experience a stop-loss claim to blunt the financial impact of catastrophic health incidents covered by their health plans. [1] Furthermore, pharmacy costs expanded to nearly 30 percent of health plan costs.[2]

While it remains to be seen what a new presidential administration will mean for the future course of healthcare and current trends in the U.S. moving forward, employers continue to take a variety actionable steps that can help not only drive benefits spend down, but also drive overall wellness among their employee populations up, including:

• Gaining wider optics into healthcare costs with solutions that focus on price transparency, such as alternative funding options, innovative plan designs, and point solutions
• Managing pharmacy benefits cost with tighter controls that include maximizing lower-cost drugs, where appropriate, as well as discounts and rebates, reevaluating PBM contracts for excess charges and fees, and other strategies that squelch wasteful spending
• Responding to inflation and higher costs with options that help manage costs, stretch paychecks, and make care more affordable
• Elevating the role of technology, data, and analytics in all aspects of benefits management to foster better decision making, efficiencies, and employee engagement
• Improving overall workplace wellness with education, tools, and resources that encourage healthier employee behaviors – mentally, physically, and financially
• Honing practices that create more personalized employee experiences to help increase engagement and retention among employees and ease labor challenges

To respond to these trends with confidence and the resources to forge ahead, employers can benefit from consultative partnerships with trusted advisors. They will work with you to find creative ways to transcend market shifts, consider alternative funding options, explore innovative health plans and technology solutions, and structure affordable total rewards packages that include salary, benefits, wellness, recognition, and career development – helping to make a positive impact on their employees’ lives.

As we head into 2025, it is our goal to help employers understand the state of the employee benefits market, provide insight into key trends that are impacting employees’ needs for options and choice, and give practical recommendations that can help shape decisions and strategies that can control benefits costs without sacrificing employee satisfaction.

Introduction

As healthcare costs grew, claims trends evolved, and employee preferences shifted in 2024, the need to foster a culture of wellness while mitigating cost drivers prompted U.S. employers to make greater strides toward cost control and risk management.

While average health plan rates at renewal time were up seven percent, benefits advisors found U.S. employers relieved to still be paying single digit increases as multiple trends converged to drive benefits costs higher.[1]

Key trends impacting employers over the past year include:

Healthcare costs – Due to more diagnoses of cancers and other serious health conditions, medical claims are escalating in both number and severity, driving more expensive insurance premium costs for employer-sponsored health plans. Additionally, prescription drug costs are surging. Drug shortages, specialty medications, oncology drugs, GLP-1 utilization, and gene therapies for chronic conditions and hereditary diseases are all driving up costs in health plans. In the face of persistent cost pressures, some employers are reimagining their approach to benefits.

Whole-person health – Realizing that physical health is just one part of well-being, employers are continuing to expand the range of benefits they offer employees to address the entire person. Not only is the need for mental, emotional, and financial wellness offerings growing, but employees now expect them, as seven in 10 surveyed believe their employer has a responsibility to ensure they are physically, mentally, and emotionally well.[2] To help contain costs while offering comprehensive benefits, employers are leveraging lifestyle spending accounts, more digital and technology tools, and more robust employee assistance programs, to name a few.

Financial wellbeing – Facing higher prices for housing, groceries, gas, transportation, and more, employees seek benefits that provide a greater sense of financial security. Even with the Federal Reserve lowering the Federal Funds Rate in September 2024, workers are ambivalent about their finances. As a result, there’s a growing expectation for employers to offer support beyond traditional retirement plan benefits that can ease the pressure employees are under to stretch paychecks to pay for daily living expenses. Offerings in high demand at this time are those that can help employees access emergency savings and pay off large debts (e.g., student loans).

Employee engagement and retention – Multigenerational workforces, remote work arrangements, and upskilling challenges continued to impact employers this year. Employee engagement and retention initiatives seemed to center around return-to-work mandates, particularly in finance and tech sectors, professional development initiatives, and lifestyle saving accounts as employers appear ready to regain control over the job market, help reestablish a sense of belonging within their workforces and reengage employees in their work.

Dive Deeper

In the full report, we review what the shifting trends mean to employers moving forward and what actions they can take to better manage higher benefits costs. Gain insights and recommendations from our employee benefits experts and learn how benefits advisors can help transcend major market shifts to harness viable opportunities for organizations to protect the possible.

Download the full report