Inside the rapidly changing world of employee benefits

Insurers are projecting medical costs will increase globally in 2025 — by about 10.4%, according to WTW’s 2025 Global Medical Trends Survey.

Specifically in the U.S., insurers project a 10.2% increase in 2025, up from 9.3% this year.

Notably, WTW researchers said that public healthcare systems worldwide have been overwhelmed due to high demand and low resources, which has led to people turning to private providers.

In the U.S., in particular, the face of employer-sponsored healthcare continues to shift, especially as GLP-1 coverage remains a hot topic. A Mercer report found that coverage for obesity drugs ticked up 44% among companies employing 500 or more workers, similar to the 41% increase of the year prior.

In addressing a digital audience last month, a healthcare company CEO said the key for HR managers and benefits specialists is to assess value for their specific workforce. This echoes the previous advice of benefits experts, who have noted the importance of data and feedback in the process. 

Linda Pham, WTW’s global health and risk leader for Integrated & Global Solutions, said in a statement the “seemingly never-ending rise in costs” creates a constant challenge for employers. To respond, employers will need to balance cost increases with budget expectations, Pham said, and emphasize “data-driven” outcomes for both business and health outcomes.

Some of the factors that are affecting healthcare costs may be out of employers’ control, Courtney Stubblefield, WTW’s managing director of Health & Benefits, said in a statement. Still, Stubblefield said, “Employers can explore initiatives that may help control costs while boosting the value of their health benefits.” This looks like weighing all the options for vendors, including telehealth solutions.

Employees may see an immediate pay boost by job hopping, but doing so may also significantly decrease their retirement savings in the long term, according to a Vanguard report.

The investment firm found that the median job switcher sees a 10% increase in pay as well as a slight percentage point decline in their retirement savings rate after taking a new job. Vanguard analysts said this is due to the design of most employer-sponsored 401(k) plans, whose default savings rates differ from employer to employer and which do not always automatically enroll new employees.

Vanguard gave the example of an employee who earns $60,000 annually at the start of her career and switches jobs eight times in her lifetime — a total of nine jobs held overall, which Vanguard said is the typical amount for U.S. workers — finding that the employee’s potential lost retirement savings could be as much as $300,000.

“Put differently, [the employee] would have a 41% smaller retirement nest egg and be able to fund an estimated six fewer years of retirement spending than if she had remained with one employer,” Vanguard analysts said.

Those calculations assume the employee would have a stable career had she not changed jobs or, if she had changed jobs, that each employer she worked for would have a default retirement plan savings rate of 3%.

Why retirement woes are HR’s problem

Previously, the company said in a 2023 report that overall retirement saving participation increased between 2006 and 2021, with an especially large jump among Generation Z workers.

Despite that finding, however, retirement confidence remains low for U.S. workers generally. An August Transamerica survey found that only 21% of middle class Americans felt very confident that they would be able to retire fully or maintain a comfortable lifestyle in retirement. A separate poll by Economist Impact and Nuveen found that more than half of workers at mid- and large-sized U.S. companies lacked confidence in their ability to retire between ages 65 and 67.

Employee financial stress is an HR concern, given that 1 in 4 employees surveyed in a 2024 SoFi report said that stress reduces their productivity and confidence on the job. The same report found that 55% of HR leaders recognized the impact financial stress has on employee mental health, while 2 out of 5 said the same of employee productivity and focus.

Moreover, offering retirement assistance could aid retention goals. A 2022 study by Morgan Stanley at Work found that 94% of employees said retirement planning assistance from financial professionals is a priority when choosing where to work.

How employers can help

One solution for employers is to increase the default rate at which enrollees begin plan participation, Vanguard said. In the above example, the analysts found that increasing the rate from 3% to 6% would leave a savings gap of just $70,000. But not all participants may be able to afford a higher savings rate, meaning employers might have to offer “emergency expense withdrawals or other liquidity features” to prevent workers from choosing not to enroll.

Two additional ideas would require policy changes, Vanguard said, because “existing laws require automatic contribution rates to uniformly apply to all employees after giving them the required notice.”

The first involves setting default savings rates based on an enrolled employee’s age, as workers with longer tenure at a previous employer “tend to be older and experience a greater savings slowdown when switching jobs,” Vanguard said. The second would be to default to the rate that the employee had in their previous employer’s plan, if that rate is higher than the employer’s current default rate.

At an HR Dive virtual event, Lisa Gomez, assistant secretary of labor for employee benefits security at the U.S. Department of Labor, said that employers should consider designing flexible retirement plans that allow employees to address financial hardships when they arise. Gomez also pointed to employers’ role in educating employees on how to save and how to manage their retirement plans.

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By Included Health

Empower your workforce for higher engagement, better health outcomes, and lower costs

As a benefit decision-maker, you are acutely aware of the need to balance cost management with providing high-quality healthcare benefits. Empowering your employees to better understand and utilize their healthcare benefits can drive higher engagement, achieve better health outcomes, and significantly reduce costs. This strategic approach is essential for long-term value and sustainability.

The current healthcare system: A source of frustration

Healthcare access is essential for your employees, but navigating the system is often frustrating, time-consuming, and expensive. Many employees only engage with healthcare when necessary, leading to confusion and overwhelm, especially with understanding insurance, benefits, and finding quality care. Employers face similar frustrations with rising costs, fragmented care, and lack of transparency. In 2023, the average annual premium for employer-sponsored family coverage hit $23,968, with workers contributing $6,575.

The importance of employee engagement

Engaged employees are more likely to be smart healthcare consumers—they’re more likely to utilize preventive care services, adhere to treatment plans, and make informed healthcare decisions. Highly engaged employees are 21% more likely to be involved in wellness programs and have a 41% lower health-related absenteeism.

Achieving better health outcomes

When your employees are well-informed about their healthcare options and actively participate in their health management, they are more likely to seek preventative care, manage chronic conditions effectively, and avoid unnecessary emergency room visits.

Preventive care: A proactive approach

Preventive care is the cornerstone to better health outcomes. When employees understand its importance and have easy access via virtual care, they’re more likely to use these services. According to the CDC, increased use of preventive care could save thousands of lives and billions in healthcare costs. Establishing a primary care provider (PCP) is crucial for ongoing health management, offering consistent care and guiding patients through the healthcare system.

Effective management of chronic conditions

Chronic conditions, such as diabetes, hypertension, and heart disease, are significant drivers of healthcare costs and can severely impact employee productivity. Empowered employees who actively manage their chronic conditions are less likely to experience complications and hospitalizations. Education and resources, such as disease management programs, can play a pivotal role in helping employees manage their health.

Reducing unnecessary ER visits

Emergency room visits are not only costly but often indicative of gaps in primary care access and disease management. By educating your employees on appropriate care settings and providing access to alternatives like virtual primary and urgent care, you can help reduce unnecessary emergency room visits. Virtual primary care, in particular, has proven to be a cost-effective solution, offering immediate access to care for non-emergency issues.

The role of wellness programs and resource group partnerships

High-performing wellness programs are pivotal in achieving better health outcomes. A National Business Group on Health report highlighted that companies with robust wellness programs experience a 25% reduction in sick leave, health plan costs, and workers' compensation and disability costs. Moreover, wellness programs can foster a culture of health, encouraging your employees to make healthier lifestyle choices that benefit both their personal and professional lives.

Mental health and well-being

Stress, anxiety, and depression can negatively impact physical health and work performance. According to the World Health Organization (WHO), for every $1 invested in scaling up treatment for common mental health disorders, there is a return of $4 in improved health and productivity. By addressing mental health proactively, you can reduce absenteeism, enhance productivity, and improve overall employee satisfaction.

3 strategies for empowering employees and lowering costs

To harness the full potential of healthcare benefits, employers need to implement strategies that empower their workforce:

1. Consolidate and simplify: By re-evaluating and consolidating benefit offerings, embracing a beginner's mindset to identify inefficiencies, and leveraging strategic vendor partnerships, employers can optimize their benefit packages while managing costs.
2. Personalized Support: Prioritizing employee engagement and satisfaction through high-quality, customized benefits can enhance overall job satisfaction and loyalty.
3. Technology Integration: Jump-links and single sign-on experiences for employees gives the impression that their benefits are disconnected and fragmented. Utilizing one place for access, answers, and advocacy provides a seamless, all-in-one healthcare experience that keeps employees engaged and empowered. 

The long-term value proposition

The benefits of empowering your employees with a deeper understanding and better utilization of their healthcare benefits extend beyond immediate cost savings. By fostering a healthier, more engaged workforce, you can enhance productivity, reduce absenteeism, and improve overall employee satisfaction.

To sustain their workforces as labor demographics skew older, employers must foster age-inclusive work environments and tailor benefit packages to meet older employees’ needs, according to a report by Bank of America and the Global Coalition on Aging.

Examples of benefits that best support older workers’ needs include: Flexible work and phased retirement options, caregiving and grandparents’ leave, menopause support, and assistance with financial and health care literacy, according to the report, which was shared with HR Dive on behalf of Bank of America.

To cultivate an age-inclusive workplace, managers should focus on ways to engage multigenerational teams and promote the sharing of knowledge and expertise, the report recommended. Companies can do this by being open to employing older workers instead of dismissing them as overqualified, and fostering collaboration and two-way mentoring between older and younger workers.

The aging workforce is a trend that consultants and academics have watched with interest for some time.

Six years from now, workers 55 and older will comprise a quarter or more of the the workforces in G7 countries (U.S., Canada, U.K., Germany, Japan, France and Italy), a nearly 10% jump from 2011, according to a July report from global consultancy firm Bain & Co.

In the U.S., workers already skew older. As of 2023, adults aged 65 and older made up nearly 30% of the American workforce, a jump from 23% in 2000, the Employee Benefits Research Institute reported in the spring.

Given the shift, now is the time to “let go of generational stereotypes, focus on employment factors that matter across all ages, and take a nuanced approach to understanding how different factors interact and affect each individual’s decision to stay or go,” the report emphasized.

Combating ageism, in particular, makes business sense, BofA and GCoA said. Ageism against those over 50 cost an estimated $850 billion in 2018, they pointed out.

That said, strategies providing benefits which factor in age and individual needs are key to productivity and retaining workers, the report stated: 60% of employees say their benefits package makes them feel more valued, and 80% choose additional benefits over total compensation, research by BofA and GCoA found.

Benefit packages tailored to older workers are especially important because they allow older workers to work longer and prepare for retirement on their own terms, the report said.

For many employees, this is critical. Nearly 60% of U.S. workers at mid- and large-sized companies lack confidence in their financial ability to retire at the typical age (65 to 67), according to a recent survey by Economist Impact and TIAA subsidiary Nuveen. The sentiment was stronger among Black, Hispanic and Asian workers, compared to White workers, the firms said.

Flexible work and phased retirement are two win-win options, BofA and GCoA pointed out. These options provide older workers with additional financial support and allow them to stay engaged longer, while enabling employers to continue to benefit from their experience and expertise, the report explained.

Career extension — offering employees opportunities to expand their responsibilities within their current roles — is another mutually beneficial option, the report noted. In this respect, career extension has been associated with higher job satisfaction, increased engagement and better employability among older workers, it said.

However, one demographic faces the brunt of both ageism and sexism — older women, who experience more challenging stereotypes than their male counterparts, the report said. To address a sensitive but related issue, employers can provide menopause benefits and policies that change company attitudes toward it, BofA and GCoA suggested.

Although most adults don’t feel comfortable discussing menopause, according to a 2022 survey by Ipsos, ignoring it comes at a cost. Symptoms associated with menopause add up to $1.8 billion in lost work time each year in the U.S., a Mayo Clinic study found.

Women also bear the brunt of caregiving, making up 75% of the caregiving demographic, the BofA/GCoA report said.

Caregiving can require as many hours as full-time work, but employers have a range of options they can offer to support caregivers, including leave policies that allow employees to take time off for themselves or loved ones, options for remote work, increased paid time off, emergency backup care, and respite care, the report said.

The average cost of employer-sponsored health insurance climbed to $16,501 per employee in 2024, up 5% from the previous year, according to results from Mercer’s 2024 National Survey of Employer-Sponsored Health Plans. Employers expect it to climb another 6% in 2025, Mercer said. 

That increase is partially driven by prescription drug cost, which is the fastest-growing cost segment, according to a news release. Pharmacy benefit cost increased 7.7% this year, after rising 8.4% in 2023, propelled by greater use of GLP-1 drugs for diabetes and weight loss, the survey of 2,194 employers found.

GLP-1s are nearly universally covered for diabetes but not yet for obesity treatment, although that share is growing. In 2024, coverage for obesity drugs increased to 44% among employers with 500 or more workers, compared to 41% last year, and 64% among the largest companies, up from 56% the previous year, according to the release.

“Employers doubled down on strategies to manage cost growth while finding ways to improve key benefits to support employees and their families in 2024, including expanded coverage for GLP-1 medications and fertility treatments,” Ed Lehman, Mercer’s U.S. health leader, said in a statement. 

Tracy Watts, Mercer’s national leader for U.S. health policy, said GLP-1s could “turn the tide on the obesity epidemic and positively impact downstream medical costs.”

“Cost is clearly a concern, and employers are adding authorization requirements to ensure the medications are used by members who will benefit the most,” Watts said.

Drug prices are among the biggest threats to healthcare affordability, according to 99% of the nearly 190 employers surveyed recently by the National Alliance of Healthcare Purchaser Coalitions. 

In the NAHPC survey, about 46% of employers said they cover GLP-1s for obesity, and another 21% said they are debating doing so in the next three years. Of those companies either offering or considering GLP-1 coverage for obesity treatment, many said they might take steps to manage costs, such as limiting access to those with chronic conditions or a certain body-mass index.

Increased telehealth utilization wasn’t linked to more low-value services at primary care clinics, according to a study published in JAMA Network Open.

The research found no association between practices that used high levels of telehealth and most types of low-value care, or services that have no clinical benefit for patients and rack up costs.

The findings could reassure policymakers who have raised concerns that virtual care could increase unnecessary or wasteful services and drive up healthcare spending, the study’s authors wrote. 

Telehealth plays a larger role in healthcare delivery in the wake of the COVID-19 pandemic, which pushed clinicians to deliver more care remotely to avoid spreading the virus. 

But regulators, lawmakers and providers are still trying to hash out policy questions surrounding virtual care, like how to ensure quality and protect in-person options — as well as how much to pay for its use. 

Driving up wasteful healthcare spending is another concern for policymakers. One study published in 2022 found some patients with acute conditions were more likely to require an in-person follow-up appointment after a telehealth visit, raising concerns about duplicative care. 

The convenience of telehealth might also drive unnecessary utilization or push providers to prescribe more diagnostic tests, according to the latest JAMA study.

But the new research, which studied data from more than 577,000 Medicare beneficiaries, found no link between telehealth use and low-value care.

The study divided practices based on how many telehealth services they provided in 2022. Researchers then analyzed primary care practices’ rates of low-value services, including CT scans for uncomplicated acute rhinosinusitis and imaging for headaches without complications or nonspecific low back pain. 

Cervical cancer screenings for women over 65 years old and low-value thyroid testing actually decreased among practices with high levels of telehealth use, according to the research. Six other types of low-value services weren’t affected by the amount of virtual care delivered at all.

Use of low-value cervical cancer screenings actually decreased in primary care clinics with high telehealth visits, likely because the pap smear test needs to be conducted in-person anyway, according to the study’s authors.

The reasons for fewer wasteful thyroid screenings were less clear, but virtual care might limit opportunities for patients to undergo lab tests during their visits due to convenience, they added.

Women’s use of health benefits can influence workplace outcomes such as attendance, retention and productivity, according to a report from the Integrated Benefit Institute.

For instance, 89% of employed U.S. women said employer benefits positively influence overall workplace satisfaction, and 85% said benefits play a crucial role in attracting and retaining talent.

In particular, benefit use was associated with fewer missed workdays, with the greatest effects seen from mental health benefits, reproductive health services and maternity care.

“This reveals a powerful link between mental health support and workplace attendance,” Sera-Leigh Ghouralal, the lead researcher of the study, said in a statement. “It’s clear that investing in comprehensive mental health support isn’t just good for employee well-being — it’s a strategic approach to maintaining a productive, engaged workforce.”

In a survey of more than 1,000 full-time employed women across various industries, preventive care was the most commonly used benefit, with 63% of respondents saying they access it. After that, 54% said they used mental health support.

The highest rates of benefit use occurred among women between ages 30-39, with the highest usages in the healthcare, education and technology industries. Women with higher incomes between $100,000-$150,000 reported more frequent benefit use as well.

Top barriers to benefit use included cost, time constraints and scheduling difficulties. Women between ages 40-50 reported the highest challenges across all barriers, while middle-income women encountered the most barriers.

Reproductive health benefits — including fertility treatments and menopausal support — can help retain women in the workplace, HR experts told HR Dive. As HR teams become more involved in shaping the “people” part of business, benefits can be directly tied to holistic health, employee satisfaction and retention.

When workplaces lack complete benefits packages, they often lose out on talent, especially mothers and older women in leadership, according to a British Standards Institute report. Employers should “ask women what they want” and “partner with employees to embed a supportive culture,” the researchers said.

Eighty-two percent of more than 200 executive benefits decision-makers said executive benefits are strategically important to their overall company success, according to the 2024 U.S. Executive Compensation and Benefits Trend Report from NFP, a property and casualty broker. 

Of those surveyed, 61% said retention has been a top factor shaping executive benefits decisions in the past year, and 71% said retaining those workers will have “a significant impact” on benefits decisions in the years ahead. 

“Regardless of company size or industry, teams are less likely to reach their potential if they lack exceptional leadership. Our findings show that comprehensive benefits packages are key to providing the financial incentives needed to attract, retain and reward top talent and put employers on the path to success,” Tony Greene, president of NFP's executive benefits division, said in a statement.

Despite the role executive benefits play in retaining workers, NFP’s data showed that only 29% of respondents said they fully understood their benefits. 

“There’s a clear need for improved communication," Greene said. “Employers should enhance their outreach and education to ensure executives fully grasp and appreciate the value of their benefits, particularly complex offerings.”  

Companies are offering nonqualified deferred compensation plans, performance-based incentives, supplemental executive life insurance and first-class air travel as part of their executive benefits packages, the report found. 

June research from WTW found that a large majority of U.S. employees — not just executives — are choosing to stay with their current employer and cited pay, health benefits and flexible work arrangements as some of the reasons why.

The IRS has detailed the steps employers must take when contributing student loan payment matches to workers’ defined contribution plans — a benefit offering that became available this year.

Among other things, the agency clarified eligibility rules and certification requirements in a question-and-answer format.

The interim guidance applies to plan years beginning after Dec. 31, 2024. The IRS said it will propose regulations providing further guidance, but that plan sponsors may rely on the new notice for now.

The SECURE 2.0 Act, enacted in 2022, aimed to address shortfalls in employee retirement savings. It allowed for the creation of pension-linked emergency savings accounts, expanded auto-enrollment requirements for retirement plans and, relevant to Monday’s guidance, allowed for matching contributions based on employee student loan payments.

Specifically, that final provision allows plan sponsors to make matching contributions to defined contribution retirement plans with respect to employees’ qualified student loan payments as if they were pretax, Roth or after-tax contributions, according to an analysis from consulting firm Mercer; employers can offer the match to any employee eligible to participate in the plan, even if the employee doesn’t contribute to it.

Employers should consider such matching as a way to attract and retain talent, Mary Moreland, executive vice president of human resources at Abbott, urged HR professionals in a June op-ed.

She cautioned, however, that such offerings take time to deploy, recommending that benefits professionals allow for six to 12 months of planning. Communication plans must be crafted carefully and one-on-one conversations can increase employee engagement and comfort with the program, she added.

Employers will soon be invited to comment on Monday’s notice and provide feedback before the IRS drafts regulations. Once the notice is published in the Federal Register, the agency will accept comments for 60 days.