Culture   //   January 24, 2025Exploding costs, AI and Trump to shake up employer healthcare benefits By Tony Case

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HR leaders must navigate a fast-evolving healthcare benefits landscape this year, as companies face more pressure than ever due to rising costs, changing employee expectations and the need to maintain competitive benefits packages — this, as the Trump administration is already having a titanic impact on employers’ health strategies.

The numbers tell the story of how organizations are adapting their health and wellness plans to meet a range of challenges while taking advantage of opportunities aimed at controlling costs, enhancing wellness initiatives and balancing their budgets.

Here’s a look at how healthcare benefits are evolving, by the numbers:

Employer healthcare costs continue to soar

According to insurer Aon, employers will see a 9% average spike in their outlay for healthcare benefits this year. The impact varies by company size, with small employers facing a 10% increase and larger companies shouldering an 8% jump. Meanwhile, some 1 in 9 small companies expect a bump of 20% or more, compared to 6% of midsize firms and fewer than 2% of larger organizations.

Employees are also paying more for coverage

The response to these cost pressures is clear: 4 in 5 employers are raising employee contributions to health insurance premiums. The average increase for 2025 stands at about 6%, up nearly a full percentage point versus last year. Interestingly, while larger employers can generally absorb more of the cost increase, small employers are limiting employee contribution increases more than midsize firms.

Say so-long to those yoga classes

According to employee benefits platform Ben, businesses’ spending on benefits like wellness apps and yoga classes has skidded by 13% since 2022, including a 10% decline in 2024 alone. At the same time, spending on foundational benefits has surged dramatically, with medical insurance spending last year increasing by 105% per employee each month and life insurance up 115%.

Mental health is still a top priority

Mental health remains of primary importance to employers, according to employee benefits platform Wellable, with 86% of insurance brokers reporting that their clients are boosting investments in such programs. Even more telling: 26% of companies indicate significant growth in mental health spending, marking the sixth consecutive year that mental health has led wellness investment priorities.

Obesity drugs give employers pains

Employer strategies related to controlling costs are evolving quickly — particularly as weight-loss drugs grow in popularity. After increasing employee contributions, the second most common action is implementing strategies to manage GLP-1 (blood sugar-regulating) drugs for diabetes and obesity treatment, with more than half of large companies developing specific management protocols including prior authorization and step therapy requirements (a process where patients must try less expensive treatments before progressing to a more expensive option), per Aon. The market for weight-loss drugs continues to soar, growing from $2.8 billion in 2024 to a projected $4.2 billion this year.

Caregiving support sees dramatic surge

According to employee stipends platform Compt, employer health and wellness benefits have a 60% utilization rate, meaning that for every $100 allocated, $60 is being actively used by employees. Meanwhile, caregiving support has jumped by 300% as companies respond to the changing needs of employees and their families, with 71% of spending now going to local vendors versus major services.

The growing role of AI

Ben predicts technology, namely AI, will play an increasingly significant role in benefits design and delivery, offering solutions for personalizing packages at scale while keeping costs in check. The shift comes as 88% of workers report feeling very or extremely engaged, despite 82% experiencing burnout, according to executive search firm DHR Global — suggesting that while benefit strategies may be evolving, their impact on employees’ feelings of connectedness to the workplace remains complex.

Trump dumps $2 drug list

Less than a week in, and the Trump administration has already signaled significant changes ahead for healthcare, as Fierce Healthcare reports. A 60-day freeze halts key Biden-era initiatives affecting benefits, particularly Medicare Advantage and prescription drug coverage. Trump also put the brakes on Biden’s prescription-pricing policy, including a $2 drug list planned for 2027. This year, employers should expect still more changes out of Washington to impact benefits, necessitating they reevaluate strategies for keeping the rank and file healthy and for attracting talent with the most robust offerings.

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