Employee benefits are undergoing a transformative shift, and employers can seize this opportunity to differentiate themselves as top employers. The modern workforce comprises diverse generations with evolving expectations regarding work-life balance, mental health, and personalized benefits. In this dynamic environment, understanding and implementing the latest trends in employee benefits can set an organization apart.
This article delves into five key trends that will shape employee benefits in 2025.
New Administration’s Benefits Changes
Following the 2024 election and the return of the Trump administration to the White House, employers are closely monitoring potential changes to the healthcare system. The fate of the Affordable Care Act subsidies, set to expire at the end of 2025, remains uncertain. The non-renewal of these subsidies could lead to premium increases and a decline in enrollment. Additionally, there may be modifications to Medicare and Medicaid, which could influence employer decisions regarding retiree health benefits and supplemental coverage options.
Furthermore, employers will need to consider how Trump’s platform will impact reproductive health and family policies, such as paid leave, childcare, and the child tax credit, for their employees. The recent election results could bring about significant changes to employee benefits for the next four years and beyond.
Health Plan Design Modifications
Several industry surveys and reports indicate that employers anticipate healthcare costs to rise between 7% and 8% in 2025. Provider shortages, escalating drug costs, chronic health conditions, and aging populations continue to drive up healthcare expenses. Moreover, the increasing popularity of glucagon-like peptide-1 (GLP-1) drugs and advanced treatment options, such as cell and gene therapies and biologics, despite their high cost, adds to the pressure on healthcare providers.
This year, employers may face challenges in balancing rising healthcare costs with maintaining affordable benefits for employees. Consequently, many employers will implement multiple cost-saving strategies. One popular approach is modifying health plan designs. A Mercer survey indicates that half of employers (53%) plan to make cost-cutting changes to their plans in 2025, up from 44% in 2024. These changes often involve raising deductibles and revisiting other cost-sharing arrangements, leading to higher out-of-pocket costs for employees seeking medical care.
In previous years, employers hesitated to pass on cost increases due to concerns about employee attraction and retention. While cost-sharing is not the preferred option, more employers this year may raise deductibles, premiums, and copays to offset rising costs. However, many employers have delayed making plan-related changes due to the high healthcare costs that have persisted for several years.
Another strategy employed by employers is to maintain full coverage of recommended prevention and screening services or incentivize employees to seek cost-effective care options. Additionally, efforts to enhance employee healthcare literacy can empower individuals to make informed and cost-effective healthcare choices.
Supportive Family-building Benefits
Reproductive health care remains a critical concern for employers as they strive to meet employee needs and maintain competitiveness. A ResumeBuilder.com survey revealed that one in five American workers is unlikely to consider a job offer in a state with highly restrictive abortion policies. Furthermore, three in ten employees are hesitant to work in a state that passes legislation banning in vitro fertilization (IVF), and 14% of workers are likely to relocate to another state if such legislation is effectively enacted in their current state. While employers cannot control their state of location, it is essential to address these concerns.
Understand employee sentiment and consider benefits and support that cater to their needs.
More employers are offering family-building benefits because they’ve proven highly valued by employees seeking to start or build their families. This year, many employers are expanding their benefits offerings to include the following:
– Paid parental and adoption leave
– Child care subsidies
– Flexible scheduling
– Surrogacy benefits
– Family planning assistance
– High-risk pregnancy care
– Pregnancy, lactation, postpartum, and menopause support
– Testosterone deficiency treatments
Employers providing legal reproductive care benefits should carefully consider the implications of these offerings as reproductive health care laws continue to evolve.
Growing Popularity of GLP-1 Drugs
This interest and spending on GLP-1 drugs are major drivers of rising healthcare costs. While GLP-1 drugs were traditionally used to treat diabetes, they are now increasingly sought after for weight loss.
These drugs are available in various doses and strengths and are intended for long-term use for their approved purposes. GLP-1 treatment typically costs around $1,000 per individual per month and requires continuous use. When considering covering weight loss drugs, employers often express concerns about the long-term commitment required for their effectiveness.
GLP-1 use is already widespread, with approximately 1 in 8 Americans having used a GLP-1 drug and 6% currently taking one. However, this number is projected to increase in the coming years. Investment bank J.P. Morgan estimates that 9% of the U.S. population could be on GLP-1s by 2030.
This trend has implications for workplaces, as employees increasingly request that their employers cover weight loss drugs. Given the high cost of GLP-1 drugs and the long-term commitment required, employers may still be hesitant to cover them despite the growing demand.
Rise of Biosimilars
Specialty drugs, particularly biological drugs, are experiencing rapid growth in pharmacy spending. Biologics are medications derived from living organisms, such as sugars, proteins, and DNA. They treat various conditions, including cancer, psoriasis, rheumatoid arthritis, and inflammatory bowel diseases. While effective in managing complex health issues, biologics are expensive. A report published in the medical journal JAMA reveals that biologics account for only 2% of prescriptions but contribute 37% of total drug spending. Moreover, biosimilars have the potential to deflate rising healthcare costs.
Biosimilars are an emerging category of biologic medications. These treatments closely resemble a reference drug, an existing biologic previously approved by the U.S. Food and Drug Administration (FDA). For a biosimilar to be approved, there must be no significant differences in safety and effectiveness compared to the original biologic. Compared to original biologics, biosimilars are more affordable, making them accessible to a broader range of patients. New biosimilars are gaining FDA approval and entering the market annually. As of December 2024, 64 of these medications have been approved and have been frequently introduced since the first biosimilar was approved in 2015.
In the past decade, biosimilar spending has resulted in substantial savings of $56 billion compared to original biologics. These savings have the potential to exceed $180 billion in the next five years. However, efforts to integrate biosimilars into the drug market have encountered challenges, including drug exclusivity rights, active patents, approval processes, and success rates in developing biosimilars.
Summary
Looking ahead, the biologics industry is projected to expand significantly. Industry projections anticipate a market size growth from approximately $450 billion to nearly $850 billion over the next decade.
In the evolving workplace landscape, companies must adapt their benefits offerings to remain relevant and meaningful to their employees. While each workplace is unique, employers can strive to monitor and comprehend the latest benefits trends to effectively attract and retain workers.