In 2023, employers were forced to confront new and enduring challenges, including rising healthcare costs, regulatory changes, ongoing high inflation, a competitive labor market, and growing employee demands. For many organizations, these challenges resulted in a difficult and demanding year. While many of these difficulties will likely continue through 2024 and beyond, understanding these challenges and likely trends can help employers develop effective and efficient strategies to address them. Employers that prepare and act proactively will likely gain a competitive advantage in the market. Addressing the challenges presented in this Market Outlook will be the key to employers’ success in 2024 and beyond.
Employers face the difficult task of finding effective ways to address rising healthcare costs while keeping employee benefits affordable. Reining in rising healthcare costs has been a major employee benefits challenge for employers for many years. However, healthcare costs are expected to increase more in 2024 than in 2023. Therefore, employers must find effective solutions to control costs while delivering benefits employees want and need. To accomplish this, employers will likely need to plan and implement multiple strategies, including plan design alteration, cost-sharing initiatives, evaluation of specialty drug costs, and claims data utilization. In some instances, some employers may need to take more drastic measures in 2024, such as modifying health plan designs to address healthcare cost increases properly. Employers have traditionally shifted increasing healthcare costs to employees to address rising costs. However, the competitive labor market over the last few years has forced employers to keep employee coverage affordable to attract and retain talent. Consequently, employers have shied away from cost-sharing initiatives.
to avoid disrupting recruitment efforts. As 2023 ended, the labor market showed signs that it is softening, and, as a result, more employers may revisit cost-sharing initiatives to rein in rising healthcare costs in the upcoming year.
Many organizations have embraced offering personalized voluntary benefits as an integral part of their benefits strategy, and more employers will either embrace these benefits or expand their offerings in 2024. These benefits are popular with employees and allow employers to tailor their benefits to employee demands and needs. Bolstering voluntary benefits will effectively allow employers to expand their benefits offerings without raising costs in 2024. Additionally, many employers will embrace a holistic approach to employee well-being to address employees’ physical and mental concerns. In 2024, inflationary pressures exacerbated many workplace physical and mental health issues. Employer efforts will include focusing on financial benefits and education to help reduce inflation’s impact on workers. Moreover, family-building benefits will become much more important for employers as they try to meet employees’ benefit needs and demands in the upcoming year.
Key employee trends
Attracting and retaining employees has challenged employers since the COVID-19 pandemic. 2024 the labor market is expected to cool slightly; however, talent competition will remain. As such, employers must remain agile and adapt to developing labor and market trends shaping the market in 2024. In particular, current labor challenges are forcing employers to find ways to balance rising healthcare costs and inflation while providing employees with benefits they value and need. Understanding this year’s key employee benefits trends can help employers attract and retain talented individuals in an evolving labor market.
- Managing Health Care Costs – High inflation, provider shortages, an increase in serious chronic conditions, and deferred care due to the pandemic continue to drive healthcare costs. According to industry surveys and reports, employers anticipate healthcare costs to grow between 6% and 8.5% in 2024, the largest increase over a decade. Employers may struggle to mitigate skyrocketing healthcare costs this year while keeping employee benefits affordable. Thus, many employers will plan and implement multiple cost-saving strategies in 2024 to mitigate rising healthcare costs,
- Increasing Personalization and Flexibility – The modern workforce comprises four or five generations of workers from various backgrounds. In 2023, many employers struggled to find a benefits plan satisfying their workforce. According to the Life Insurance Marketing and Research Association’s 2023 Workforce Benefits Study, nearly a third of all employers said that meeting the needs of their multigenerational workforce was a primary challenge. In 2024, employers will increasingly offer personalized and flexible benefits to address individual employees’ unique needs and expectations.
- Prioritizing Employee Mental Health – Employee mental health is a priority for many employers in 2024. Countless employees are experiencing a combination of mental health concerns, including stress, lack of motivation, and reduced focus. High inflation and widespread financial stress exacerbate these issues, impacting workplace productivity, retention, and morale. Given the impact employees’ mental health can have on an organization, employers are considering employees’ mental health while making important business decisions in 2024. To this end, savvy employers will continue prioritizing employee mental health in 2024.
- Focusing on Belonging – While more employers invested in diversity, equity, and inclusion (DEI) initiatives in 2023, many employees— especially those from underrepresented and marginalized groups—continue to feel excluded. These emotions can undermine work performance, inhibiting creativity, participation, and willingness to collaborate. They can also increase the risk of burnout and stress, leading to increased turnover and higher absenteeism rates. In 2024, employers are expected to address belonging to bridge the gap between existing DEI initiatives and the impact felt by employees. With that in mind, many employers are more often focusing on the factors that impact workplace belonging, such as organizational culture, leadership behaviors, and personal relationships among employees.
- Expanding Family-building and Reproductive Health Benefits – Reproductive health care benefits became a key issue for employers in 2023 after the U.S. Supreme Court’s Dobbs v. Jackson Women’s Health Organization decision ended federal protections for abortion rights and permitted states to implement their regulations. Numerous employers will continue to expand reproductive health benefits in 2024 to meet employee needs and remain competitive. Additionally, more employers are offering family-building benefits, as they have proven highly valued among employees looking to start or build their families. The impact of these benefits also often extends beyond affected individuals to make employees feel welcomed and supported in the workplace, improving engagement, productivity, and retention. In the next year, many employers are expanding benefits offerings.
- Balancing Flexibility With Return-to-Office Mandates – Many employers responded to 2023’s tight labor market by offering remote and flexible work opportunities. As some employers begin issuing return-to-office mandates in 2024, organizations that are rigid in their policies may risk losing talented individuals and DEI efforts. They may also struggle to attract new employees from a smaller talent pool. As such, in 2024, proactive employers will focus on balancing employee expectations and needs with the benefits of having employees in the office. For instance, they may offer hybrid work options as a compromise for happier and more productive employees with flexible work arrangements. Additionally, employers are increasingly focusing on creating safe, empathetic, and transparent workplace environments to promote employee well-being when returning to the office.
- Prioritizing Preventive Care Services – In 2023, record-high inflation and skyrocketing medical care costs prevented numerous employees from seeking necessary preventive care for fear of incurring medical debt. However, avoiding medical care can worsen long-term health outcomes and increase costs for employers and employees by preventing the early detection of serious illnesses. As employers struggle to mitigate rising healthcare costs in 2024, many will focus on keeping employees healthy and providing benefits education to help guide them on their journeys to be educated healthcare consumers, maximize their benefits, and understand the importance of routine care.
Many workplace challenges employers dealt with in 2023 will continue through 2024 and beyond. While some of these challenges are familiar, others are not. Consequently, employers may need to operate more effectively and efficiently to set themselves apart. This will likely require employers to proactively embrace and simultaneously respond to the evolving employee benefits market. Critical to employers’ success in 2024 will be protecting workers’ health and well-being, accommodating employees’ needs and desires, embracing cost-effective strategies, and prioritizing attracting and retaining skilled workers.
Organizations that prepare and act quickly will stand out in today’s competitive market. This may also allow them to weather the challenges this year may bring and position themselves for sustained growth and success. The best strategies will vary by workplace, but awareness of the trends and themes presented in this Market Outlook can guide employers as they plan and establish benefits strategies in 2024.
Please contact us for more information about these trends and to request additional resources on these and other important workplace topics.