When developing employee benefits strategies, employers and benefits advisors must balance the realities of today’s business environment with the desire to offer a comprehensive benefits package to attract and retain workers. While the economic outlook across most industries is promising, inflation and other cost pressures impact an employer’s ability to offer a robust suite of benefits.
In the competition for talent, employers look to provide benefits that are most valuable to today’s workforce in a cost-effective way. As such, the economic value of benefits programs are front and center for employers.
Stressors
Cost pressures manifest themselves in several ways. Labor costs, including the cost to provide benefits to workers, often comprise the majority of a typical business’s expenses. The strong labor market continues, and, as a result, many employers are offering higher wages to attract and retain quality employees. At the same time, rising benefits costs present challenges to employers in their desire to offer a competitive benefits package.
A major contributor to the cost of benefits (for both employers and employees) is the cost of health insurance. According to the Kaiser Family Foundation, the average annual premiums for employer-sponsored health insurance in 2024 increased 6% and 7% for single and family coverage respectively, rate increases higher than that of wages. Looking forward, medical costs will continue to rise. Rising costs impact not only employers’ benefits strategies, but also workers' ability to participate in other workplace benefits, such as retirement savings plans, voluntary benefits, and wellness programs.
LIMRA research reveals that more than 7 in 10 employers (71%) cite benefit costs as having a significant impact on their benefits strategies, and companies have taken actions to help them manage their programs in the current environment. Many of these actions drive efficiency, manage costs, streamline benefits administration, and encourage better benefits utilization — all to ensure a benefits program that meets the needs of employers and workers in a cost-effective way.
More than half of employers (55%) negotiated with providers for better terms, lower premiums and fees. More than 4 in 10 (43%) made changes to things like plan features, co-pays, and deductibles. Close to one-third of employers (31%) switched providers (insurance companies, healthcare, retirement plan providers, etc.). A similar percentage (30%) eliminated underused or ineffective benefits.
Payback
Benefits advisors are also experiencing this increased focus on economic value with their clients. In recent interviews with top benefits advisors conducted by LIMRA, many note that employers are asking more questions about the efficacy of their benefits program overall and benefit offerings specifically, looking for more data-driven insights, requiring justification for recommended approaches and demanding economic value (i.e., return on investment) from their programs. This increased focus on economic value has changed the conversations that advisors are having with their clients and is changing what benefits consultants value from carriers and other partners. Carriers’ and other organizations’ ability to connect products, services and support in ways that provide the greatest return for the advisors, the employer and, ultimately, the end customers (workers) are priorities.
Looking ahead
While the world of work continues to evolve, one thing remains certain: Workplace benefits are central to employers’ value propositions in the competition for talent. The future of workplace benefits will be defined by delivering both meaningful value and economic value. It is those who are adaptable and can align their value propositions to the needs of a changing market that will lead the way in connecting today’s (and tomorrow’s) workers with the coverages they need.
Patrick Leary is Corporate Vice President, Workplace Benefits Research, at LIMRA and LOMA.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
