Inside the rapidly changing world of employee benefits

Nearly 3 in 4 employees said they would be more likely to stay with their employer if it offered benefits tailored to their personal needs, but what they say they value differs in notable ways from what employers think they do, according to HUB International’s 2025 U.S. Workforce Vitality Gap Index.

For example, employers are missing the mark on flexibility and work-life balance, the insurance broker and financial services firm’s Aug. 13 report found. In a survey of 1,500 U.S.-based full-time employees, 41% ranked work-life balance and flexibility higher than any other benefit, including salary. Yet only 22% of the 150 HR benefits and finance and operations decision-makers who participated in a separate survey ranked them as workers’ top priority.

Decision-makers correctly identified financial wellness as a top employee concern affecting productivity, but they may be underestimating its impact. With student debt being the likely culprit, 52% of employees aged 35-44 and 51% of those aged 18-24, reported that financial concerns affected their productivity, the index said.

While companies pull “every lever to compete for talent,” making benefit decisions based on an inaccurate view of what their workforce values has a negative impact on retention, productivity and culture, Linda Keller, HUB’s chief operations officer of employee benefits, cautioned in a press release.

Healthcare benefits is one area that needs better alignment, the surveys indicated.

For good reason, healthcare benefits make up a core part of total rewards packages: 41% of workers surveyed said concerns about health affect absenteeism and employee presence at work. But like with employee financial concerns, employers underestimate its impact, especially on younger employees, the report noted.

HUB’s research found that only 20% of employers believe health concerns are a main factor affecting productivity, yet 45% of employees aged 24-35, and 42% of those aged 18-24, reported that it does play a role.

As student debt continues to be a persistent stressor, with employees ranking retirement planning (46%) and personal wealth planning (44%) as their most meaningful financial wellness tool, according to HUB’s findings, some companies are beginning to meet the challenge.

In its 2025 Benefits and Compensation Trends report, published earlier this year, Goldman Sachs Ayco noted that more employers are letting workers convert unused PTO into cash, student loans or 401(k) contributions, although they limit how many hours employees can convert annually.

However, employers that do offer programs directed at addressing worker stress over finances may also have to help employees understand how to use the benefits, a recent report from The Hartford recommends. Three-quarters of HR benefits managers the financial services and insurance company surveyed said the financial benefits they offer often go underutilized.

The HUB report does have some positive news: Employers are on the same wavelength as their workers when it comes to paid vacation and sick leave. According to the surveys, 94% of employers offer the benefit, while 97% of employees said they use it, and 91% said they would use it if offered. 

It’s a tale as old as time: Healthcare costs are rising faster than inflation, and employers are struggling to manage them as they eat up a larger and larger share of their budgets.

Healthcare costs are expected to rise by nearly 8% in 2025, according to a report by the Business Group on Health, contributing to a more than 50% increase since 2017.

“We are now experiencing the highest year-over-year increase in more than a decade,” Jim Winkler, chief strategy officer at the Business Group on Health, said in an email. “Employers have absorbed the majority of cost increases over the past four years, and they likely cannot continue to do so.”

Pharmacy expenses are primarily responsible for recent increases in healthcare costs. From 2021 to 2023, the median percentage of healthcare spending on pharmacy rose from 21% to 27%, according to the Business Group on Health. As a result, 3 in 4 employers say they are “very concerned” about total pharmacy costs, the report says.

In addition, more people are using GLP-1 weight loss drugs, including Ozempic, Wegovy, Zepbound and Mounjaro, to treat diabetes, obesity and other conditions. 

However, while the drugs are clinically effective, they’re expensive at a price tag of about $700 to $800 per month. More than 2 in 5 adults under age 65 with private insurance — about 57.4 million people — may be eligible for GLP-1s, which could accelerate healthcare spending. 

“GLP-1s are a major contributor to pharmacy cost overall, especially as utilization extends to medical conditions beyond diabetes and weight management,” Winkler said. 

Higher rates of chronic conditions, including cancer, cardiovascular conditions, diabetes and mental health conditions, also contribute significantly to rising healthcare expenses for employers. While much of those costs are attributable to an aging workforce, initial cancer diagnoses have grown more severe among young people who deferred or delayed care during the COVID-19 pandemic, Winkler said.

Consolidation and reduced competition among healthcare providers also contribute to rising costs, especially for inpatient care.

Below are six key strategies employers can use to manage healthcare costs.

1. Hold vendors accountable for clinical outcomes and financial results.

More than 8 in 10 employers are implementing or strongly considering using the request for proposal process to secure better pricing from vendors, according to the Business Group on Health. 

Employers should rigorously assess the ROI associated with vendors’ solutions, use shared performance metrics that align with the organization’s clinical and financial goals, and replace underperforming partners as needed, Winkler said. 

However, demonstrating the ROI for “wellness or other cost-containment measures can be challenging,” said Jennifer Chang, HR knowledge advisor at the Society for Human Resource Management.

2. Lean into programs that align with value-based care models, including in-network providers that encourage cost-effective, high-quality outcomes.

Using centers of excellence — select providers that deliver specialized medical care that meet specific cost and quality benchmarks — can help lower costs for behavioral health and other services, Chang and Winkler said. 

High-performance network models that encourage more cost-effective care through greater provider-payer collaboration and value-based payment, as well as advanced primary care programs that tie reimbursement to managing specific chronic conditions, such as diabetes, can also help employers lower healthcare spending, Chang and Winkler said.

3. Adopt new strategies to manage pharmacy costs.

Alternative pharmacy benefit management programs that are more transparent, less reliant on rebates and encourage the use of biosimilars can help employers rein in rising pharmacy costs, Winkler said.

“Pharmacy is actually multiple programs that need to be fully integrated from a user experience and data-sharing perspective,” Winkler said. 

Employers do not need to use the same vendor for all their pharmacy needs, which provides additional opportunities to save costs. Employers should also pair GLP-1 access with nutritional counseling, diabetes management and other condition management approaches to maximize the benefits of these new weight management drugs.

4. Help employees navigate the healthcare delivery system.

Care navigators, employee trainings and other resources can help ensure that employees access and use the highest quality, most cost-effective care, experts said. Explaining cost-sharing mechanisms, such as copays and deductibles, to employees will allow them to “use their healthcare benefits wisely,” Chang said.

5. Build worksite health centers.

A growing number of organizations are investing in employer-sponsored primary care clinics that offer employees no- or low-cost services at or near workplaces because “they’ve been running into a brick wall” trying to reduce costs through the traditional healthcare delivery system, said Megan Colleen McHugh, a health services researcher and professor at Northwestern University’s Feinberg School of Medicine. 

WHCs can increase employees’ use of preventive medical services, improve chronic care management and enhance quality of life, according to a new study co-authored by McHugh. The paper, which evaluated the findings of 10 previous studies, found that WHCs delivered annual cost savings ranging from approximately $35,000 to $2.1 million and ROI from $1.09 to $15.88 per $1 of investment. 

However, WHCs “only work if you’re a large employer” because they have high fixed costs, and there is very little evidence about the quality of care they deliver, McHugh said. 

6. Leverage data analytics to determine which cost management strategies make the most sense. 

Employers must assess vendor performance, clinical conditions, network utilization and geographic access limitations to determine the best approach to lowering healthcare costs, experts said. 

Analyzing claims data, for example, can help employers identify what is driving their healthcare spending and “target interventions for high-cost areas,” Chang said. 

Pitfalls employers should avoid

However, in their quest to lower healthcare costs, employers must avoid strategies that could lead to employee dissatisfaction, reduced engagement or unintended consequences, Chang said. Employers need to consider their organizational culture, including its “tolerance for disruptive change,” Winkler said. 

Excessive employee cost-sharing, for instance, can harm employee morale and retention, while abruptly cutting benefits without excellent communication and support can “lead to backlash,” as employees may perceive increased cost-sharing measures as a reduction in total compensation, Chang said.

Cost-containment measures can also create equity issues if they disproportionately affect lower-income employees, she said, adding that one-size-fits-all health plans that don’t consider workforce demographics or needs can lead to lower adoption and employee dissatisfaction.

In addition, adopting new plans or wellness initiatives can “strain HR resources and require significant coordination,” Chang said. 

Employers can manage these challenges effectively by engaging employees early, providing transparent and consistent communication and rolling out changes gradually, Chang said. They should also monitor and adjust cost-containment measures based on employee feedback and utilization data, as well as ensure cost-sharing changes and wellness programs are inclusive and equitable, she said. 

Additionally, creating a workplace that supports employees’ physical, mental and emotional well-being through healthy cafeteria options, on-site fitness facilities and other measures can help “foster a culture of health,” Chang said, helping to lower healthcare costs upstream of the pharmacy and healthcare delivery system.

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By Brown & Brown

Brown & Brown recently announced the findings of its second annual Employer Health and Benefits Strategy Survey, 2026, capturing insights from 1,241 employers across the United States. The 2026 edition reveals a benefits landscape shaped by rising costs, evolving workforce needs and a growing emphasis on innovation and sustainability. 

With escalating medical and pharmacy costs, employers have moved cost-containment, for both their organizations and their employees, to the top of their strategic priorities list. In the inaugural 2025 edition of the Brown & Brown survey, employers ranked ‘attracting and retaining a competitive workforce’ as their top priority. Some of the popular strategic cost containment initiatives over the next 12-24 months include evaluating medical stop-loss plan design, conducting audits and partnering with digital health solutions to enhance plan transparency and effectiveness. 

Despite the focus on cost control, employers remain committed to supporting employee well-being. A majority (77%) say well-being programs are part of their healthcare strategies, and 78% of this cohort plan to increase related budgets. Parental leave enhancements are also on the rise, with 71% of employers offering paid leave beyond statutory requirements. 

Amidst the ever-growing popularity of GLP-1 drugs for weight loss, the survey also highlights the continued struggle for employers trying to balance access and cost. Nearly half of respondents cover GLP-1s for weight loss (48%), with the vast majority of this respondent group planning to continue coverage over the next one to two years (89%). However, for those that do cover GLP-1s for weight loss, more than six in ten have restrictions in place (63%). A significant percentage of these employers have restrictions beyond prior authorization, such as having to meet certain clinical criteria above and beyond FDA guidelines (49%) participating in lifestyle or behavior management programs (38%) and limiting member prescribing sources (35%). 

“Employers are taking decisive action to manage rising health care costs, from rethinking plan design to adopting digital care solutions and more rigorous pharmacy management strategies,” said Chana Bieker, senior vice president – benefits, national account leader at Brown & Brown. “Amid inflation, economic volatility and shifting social expectations, our survey shows organizations are prioritizing cost control more than ever. At the same time, they are utilizing available budget to reinvest in employee well-being in diverse ways, such as more inclusive benefits and expanded parental leave.” 

As health plan costs continue to increase, more employers intend to change or reduce their 2026 benefit offerings to control spending, according to survey results from Mercer.

For instance, 51% of large employers (defined as those with 500 or more employees) said they’re likely — or very likely — to make plan changes that would shift more costs to employees, such as raising deductibles or out-of-pocket maximums. The percentage increased from 45% in 2024.

“Employers project average health benefit costs to grow by nearly 6% this year, and 2026 may be even more challenging from a cost perspective,” Ed Lehman, leader of U.S. health and benefits at Mercer, said in a statement.

“While short-term cost containment actions might be needed to address current budget realities, we also see some employers using longer-term strategies, such as offering narrow network plans, that emphasize high-quality, high-value care,” Lehman said. “These strategies may improve health outcomes or make healthcare more affordable for employees.”

In a survey of more than 700 U.S. employers, including 500 large companies, 35% of large employers said they plan to offer a non-traditional medical plan option in 2026, such as variable copay plans. Among the 6% of large employers that offered a variable copay plan in 2025, an average of 28% of their covered employees chose to enroll.

When it comes to pharmacy benefits, employers pointed to challenges around covering GLP-1 drugs for diabetes and obesity. About 44% of large employers said they cover the drugs to treat obesity. Looking ahead, 77% of employers said it’s extremely or very important to manage costs related to these drugs due to their high price tag — roughly $1,000 per month per patient without rebates factored in.

“While the trend over the past couple of years has been to add coverage for GLP-1s approved for weight-loss, some employers facing large cost increases in 2026 may feel this coverage is out of reach,” Alysha Fluno, a pharmacy leader at Mercer, said in a statement. “Employers are weighing the immediate costs of covering these drugs against the potential for generating savings down the road once their workforce’s health improves.”

In addition, well-being and mental health continue to be a major priority, Mercer found. More than 75% of large employers said they’ll offer digital stress management or resiliency resources in 2026, including apps for mindfulness, meditation and cognitive behavioral therapy. Beyond that, 51% will offer in-person or live online resources for stress management or resiliency.

Looking further ahead, other research indicates employers are weighing additional changes. By 2027, nearly 1 in 3 employers plan to expand voluntary benefits, including quality-of-life products such as pet insurance and employee perks programs, according to a Gallagher report. These benefits can reduce stress, improve employee satisfaction and boost productivity, the report found.

Whether adding or subtracting benefits, most U.S. employers intend to shift their benefit strategy in the next three years, according to a WTW report. Nearly two-thirds said they’ll reallocate or rebalance spending, using benefits as a strategic tool to drive engagement, retention and purpose, WTW said.

More than half of surveyed chief financial officers said they’re weighing changes to their defined benefit plan designs in 2025 and are considering creative plan design; respondents said they’re exploring hybrid structures and flexible arrangements such as cash balance plans, according to a report from Mercer.

Despite high numbers of plan terminations in recent years, half of the CFOs surveyed said they don’t plan to terminate their defined benefit plans in the near future, which could suggest “a strategic approach to long-term pension management,” Mercer noted. Those organizations that planned to exit already have, the report said.

“With 50% of employees not confident they can turn their retirement savings into a consistent stream of income for the rest of their lives, many organizations are rethinking pension strategies and how best to support their workforce,” said Scott Jarboe, U.S. defined benefit segment leader for Mercer.

“This data shows many CFOs are not retreating from pensions — and that there’s a growing interest in creative plan design and adaptable pension solutions that cater to the diverse needs of the modern workforce, while keeping the risks for the organization at an acceptable level,” Jarboe said.

In the survey of 173 CFOs and senior finance executives, 70% said they’ve adopted dynamic de-risking strategies, up nearly from 2023. In addition, 44% said they’ve shifted more assets into fixed-income investments to bolster the stability of their pension-funded status.

Risk transfer remains a key theme, according to the report. More than 70% of respondents said they expect to offer lump-sum payments in the next two years. More than 60% said they’re weighing transferring retiree obligations to insurers through annuity purchases — or they’ve already done so.

More companies appear to be relying on external expertise as well; the report noted an increase since 2023 in organizations that have a completely outsourced chief investment officer.

Fewer than 40% of those surveyed said they were highly confident in their in-house ability to manage defined benefit plans’ complexities.

Some employers are exploring pension-linked emergency savings accounts as workers struggle to stay afloat.

The Trump administration’s proposed budget may also affect pension decisions for federal workers, with language requiring new employees to decide whether to forgo their civil service protections in order to make lower payments toward their retirement. Specifically, employees who keep their civil service protections would pay a 9.4% contribution, while those who convert to “at-will” employment would pay a 4.4% contribution. 

SAN DIEGO — As the U.S. population ages and more workers find themselves in the “sandwich generation” — those who care for both their parents and young or dependent children — companies need to start thinking about how to juggle meeting those employees’ needs with business ones, Deborah Hanus, CEO of leave management provider Sparrow, told HR Dive during SHRM’s annual conference.

If not now, soon.

“I think we’re still very much on the leading edge. A lot of companies are not thinking about it yet. They don’t even acknowledge it,” Hanus said. “But five years from now, it’s going to be everyone; it’s going to be like half your workforce.”

Pew Research Center found that already about a quarter of U.S. adults are part of the sandwich generation, according to a survey conducted in late 2021. Among those in their 40s, more than half have a parent aged 65 or older and have either a young child or an adult child they assisted financially in the past year.

“Employers do really need to be thinking about how to retain that part of their workforce,” including what investments they can make in doing so, Hanus said.

Without action, companies risk losing these workers, a May report from Motherly and the University of Phoenix Career Institute found. Half of the 1,000 mothers in the sandwich generation surveyed said they’ve left a position because of their caregiving responsibilities. And more than two-thirds said the benefits offered by their employers weren’t sufficient enough to meet their caregiving needs.

A June report by Prudential Financial also warned of the risks of underestimating workers’ caregiving demands; employees identify caregiving leave as a top benefit, yet only half of employers provide this type of paid leave, the survey of nearly 3,000 full-time employees and 750 employers found.

To that end, an absence and leave expert previously told HR Dive that, as companies make inroads in parental leave benefits, caregiving leave stands to get more attention.

Companies traditionally think having a leave policy covers their bases, but that’s not necessarily true, Hanus said. 

“In a lot of caregiving situations, it’s not one and done. You might be caring for someone for 10-plus years,” meaning there needs to be a more flexible, long-term solution, Hanus said.

Companies need to consider the options and decide how, as a team, they want to manage this and develop a philosophy toward caregiving needs, she said. That can involve educating managers and employees and considering flexible work options.

Successful caregiving leave involves a tight communication and partnership loop between the executive team and HR, Hanus said.

Managing caregiving leave is almost like looking at an accommodation, she explained, and requires going through an interactive process to understand the right way to be flexible and have the most impact.

Some workers may have a caregiver with their parents in the morning and just need to take over by mid-afternoon, while others may need to check in every 30 minutes and may not be able to be reasonably accommodated, she said.

“From a company perspective, you also can’t be infinitely flexible,” Hanus said.

Apart from understanding workers’ caregiving needs, employers also should not shy away from continuing performance reviews, she said. “It’s possible that they hired someone with a lot of family needs who also isn’t good at their job.”

SAN DIEGO — Applied Materials’ student loan repayment program for employees reaped such rewards that the company more than doubled its annual contribution after the first year, Tes Fernandez, director of U.S. benefits for the company said during a panel discussion at SHRM 2025.

In year one, the manufacturing company contributed $2,000 per employee in direct repayment of workers’ student loans. In the years that have followed, Applied Materials now pays out $4,800 per employee and uses the benefit as both a way to support generally newer hires, recent graduates and some underrepresented groups and as a recruiting tool.

“They had to go up to the CFO and ask for extra millions of dollars to add this benefit. A year later, they more than doubled the benefit amount, not because the CFO got generous, but because they were seeing the results of the benefits,” Chris Rinko, VP and student debt and health and wellness benefits administration account executive at Fidelity Investments, said during the panel, which he moderated.

When it comes to student loan debt assistance, employers have two choices, Rinko explained. They can either provide a direct payment to student loan servicers to help pay down employees’ loans, or they can elect to offer matching contributions in the 401(k) plans of workers who demonstrate they are making student loan payments.

The direct payment method can be targeted to only apply to certain groups — those who earn less or those in a specific job, for example — and can have a set end date, Rinko said, while matching contributions are tied to a company’s overall 401(k) plan offering and can’t exclude any workers.

Tracey Gannon, a senior benefits manager at eBay, said it was “kind of a no-brainer” for the e-commerce company to offer matching funds after the passage of the SECURE 2.0 Act. The law gave employers the ability to match employee contributions to certain student loan payments.

“We felt that this was just such an easy first step,” Gannon said.

The company already budgets for all employees to get the full matching contribution in their retirement plans and has a 96% participation rate, Gannon said. That meant the new offering wasn’t a big budget item for the company but could provide support to some employees in need.

Similarly, offering a matching contribution seemed like “an easy win” for The Walt Disney Co. and its workers, said Marianne Lynch, a senior manager of executive benefits and hypercare for the company.

“It’s a huge, huge benefit to reduce that burden” of student loan debt, Lynch said. At Disney, 97% of employees already receive the full 401(k) match, but for those who don’t, it’s a way not to miss out on the matching funds to which they’re already entitled, she added.

“The only change here is you're giving them another way to earn that match by paying their student debt,” Rinko said.

At companies where most employees already receive the full matching contribution, some leaders may ask, “Why bother?” with a student loan repayment match, Rinko said.

“The reason is, if it's just 1% or 2%, if you can find a path for that small number, for those people who are usually in the greatest need to earn the match, why not?” Rinko said.

The increasing use of GLP-1s for weight loss, instead of solely type 2 diabetes management, is putting employers in a tricky position, according to research from The Peterson Center on Healthcare and KFF. With the often pricey drugs, such as Ozempic and Wegovy, growing in popularity, companies have to decide whether to provide coverage for weight loss. 

However, there soon might not be a choice, one insurer reportedly told an occupational health manager at a large manufacturer. 

“Cigna told us that within the next 9 to 12 months, there’s really not going to be a choice, that all insurance companies are probably going to be covering GLP-1s for weight loss,” they said. 

The report’s authors used findings from the 2025 KFF Employer Health Benefits Survey and insights from interviews and group discussions with more than 100 U.S. employers held in summer and fall of 2025. 

Just shy of 1 in 5 large companies, those with at least 200 workers, said they covered GLP-1s for weight loss this year, and 43% of the biggest employers, those with at least 5,000 workers, said they offered the coverage in their largest plan, an increase from 28% that did the year before. 

Among the biggest employers that provide this coverage, 6 in 10 said costs have exceeded expectations, and two-thirds (66%) said they had a “significant” effect on their health plan’s prescription drug spending.

The medications work by reducing hunger signals, slowing digestion and helping people feel full for a longer period of time, but could need to be taken continuously to lose weight, the authors said. 

At one large manufacturer, spending on GLP-1s for weight loss was increasing 50% year over year, a director of total rewards said. As a result, the company decided to up co-pays, which it hadn’t “increased in forever.”

Yet, despite cost, many employers said they saw the coverage as a potential way to improve health outcomes for workers and as an important part of employee satisfaction. 

At one large manufacturer with 165 employees, about 40 are on GLP-1s for weight loss, a human resource representative said. 

“A lot of them have issues with high blood pressure. It’s not just because you know, they want to be skinny, but they’re doing it to help with their health,” the HR rep said. 

A little more than a third of companies require workers to participate in lifestyle or clinical support programs — such as meeting with a dietitian, case manager or a therapist — to receive coverage for GLP-1s for weight loss, the report found. 

One HR consultant said workers have to check in quarterly, show they’re making lifestyle changes through an app and meet with case managers.

Employers significantly misjudge how well their benefit offerings are meeting employee demands: While 75% believe their workforce is satisfied with what they offer, only 65% of employees agree, according to Aflac’s 2025-2026 benefits trend report.

One noticeable misunderstanding involves communication, spring surveys of 1,002 employers and 2,000 employees across the U.S. found. Nearly 2 in 5 (37%) of employees said they want to talk to a real person to help with benefits enrollment, but only 28% of employers offer this option. Similarly, 32% of employees said they want one-on-one access to a benefit consultant, but only 28% of employers provide it.

Employers are also out-of-touch with employee concerns about medical bills: 78% believe employees can handle this financial burden, but 44% of workers say they couldn’t cover $1,000 in unexpected health expenses. Almost 1 in 5 (19%) said they wouldn’t be able to afford $500 in healthcare costs.

To help close the gap, employers may want to consider the frequency, content and delivery method for sharing information about benefits, Aflac recommended.

For instance, “when employees hear about their benefits only once a year, it’s no surprise they feel unsure about what’s available to them or how to make the most of it,” the report noted. Yet, less than half (46%) of employers said they communicate about benefits throughout the year, and only a third (34%) of employees indicated they’re getting the messages, the survey found.

Yearlong benefits education with clear communication and ease of access can help improve employee satisfaction with — and understanding about — benefit offerings, the report said.

Strikingly, nearly 7 in 10 employees said they want more information overall. Enrollment season is a critical time for this, but it’s also when organizations fall short, Aflac stressed.

Findings from two recent studies highlight how pressing the issue is. In the first, three-quarters (77%) of employees surveyed by Voya Financial said they plan to spend more time reassessing their benefit elections during open enrollment this year, up from 69% last year.

Yet, in surveys by New York Life Group Benefit Solutions on employees’ benefit preferences, less than half of workers said they don’t even know how to enroll in benefit plans.

Being able to manage their benefits online is also nonnegotiable for most employees, especially Generation Z and millennials, the Aflac survey found. Almost 9 in 10 said that’s very or extremely important.