In 2024, employers across all sizes and industries encountered several trends influencing the employee benefits market. Rising healthcare costs, a competitive labor market, and regulatory concerns shaped how employers managed operational challenges. Several of these concerns, such as healthcare costs and labor market pressures, are expected to persist into the new year.
Furthermore, emerging issues related to shifting demands in voluntary benefits, an increased emphasis on employee wellness, and a new presidential administration are poised to impact how employers manage benefits, attract and retain talent, and navigate new and persistent risks.
Notably, for 2025, increasing healthcare costs are anticipated to reshape organizational approaches to managing employer-sponsored healthcare plans, particularly in balancing offering competitive benefits with managing overall expenses. Healthcare inflation is expected due to several factors. Firstly, the ever-growing use of specialty glucagon-like peptide-1 (GLP-1) drugs for weight loss and obesity continues to drive up healthcare costs. For 2025, these drugs could progressively be included in health plans due to rising employee demand. Beyond GLP-1 drugs, other specialty medications and treatments, such as immunosuppressants, cell and gene therapies, biologics, and antivirals, are poised to contribute to healthcare spending in 2025. Additionally, rising medical spending is expected to be driven by aging populations, an increase in patients with chronic conditions, and a labor shortage in the healthcare industry.
While some industries continue to face significant challenges in attracting and retaining talent, the labor market has generally shown signs of deceleration. The unemployment rate has trended upward, and throughout 2024, job openings decreased, often falling short of economist predictions. Despite slowing job growth and fewer openings, the labor market for 2025 could remain competitive. Data regarding layoffs is also expected to provide insights into the future of the labor market.
Employers are holding on to their workers, as indicated by the stable job market. For job seekers, compensation is likely to be the primary factor influencing career decisions, and employers should expect a greater emphasis on pay transparency and competitive benefits.
In the face of rising healthcare costs and a challenging labor market, employers are recognizing the importance of offering compelling benefits. Beyond standard health insurance and retirement plans, employers are likely to maintain or expand their voluntary benefits packages.
Several voluntary benefits are gaining traction in the market for 2025. Supplemental health benefits, such as accident, critical illness, and hospital indemnity insurance, allow employees to manage financial risks associated with unexpected medical expenses and can be used to offset deductibles, copays, and other out-of-pocket expenses. Additionally, student loan repayment assistance, often provided through educational assistance programs or qualified student loan match programs, can be particularly attractive to younger employees seeking to reduce their educational debt. Providing student loan assistance can help employers recruit and retain skilled workers. Such programs may even reduce stress, improve productivity, and increase employee engagement.
However, employers are not just focusing on compensation; they are increasingly recognizing the need to emphasize employee wellness. Obesity remains a persistent concern as it is linked to chronic conditions such as heart disease, Type 2 diabetes, and mental health issues, all of which directly impact an employee’s overall well-being and can lead to increased costs for employers. As in previous years, employers are addressing employee wellness by offering various benefits.
You can access the comprehensive employee benefits market outlook for 2025 here. Feel free to contact us for more information about these trends and to request additional resources on various workplace topics.