2024 Employee Benefits Market Outlook
January 30, 2024
In 2023, employers were forced to confront several new and enduring challenges, including rising healthcare costs, regulatory changes, ongoing high inflation, a competitive labor market and growing employee demands. For many organizations, these challenges resulted in a difficult and demanding year. While many of these difficulties will likely continue through 2024 and beyond, understanding these challenges as well as likely trends can help employers develop effective and efficient strategies to address them. Employers that prepare and act proactively will likely gain a competitive advantage in the market. Addressing the challenges presented in this Market Outlook will be the key to employers’ success in 2024 and beyond.
Employers face the difficult task of finding effective ways to address rising healthcare costs while keeping benefits affordable for employees. Reining in rising healthcare costs has been a major employee benefits challenge for employers for many years. However, healthcare costs are expected to increase more in 2024 than they did in 2023. Therefore, it’s critical that employers find effective solutions to control costs while still delivering benefits employees want and need. To accomplish this, employers will likely need to plan and implement multiple strategies, including plan design alteration, cost-sharing initiatives, evaluation of specialty drug costs and claims data utilization. In some instances, some employers may need to take more drastic measures in 2024, such as modifying health plan designs to properly address healthcare cost increases. Employers have traditionally shifted increasing healthcare costs to employees to address rising costs. However, the competitive labor market over the last few years has forced employers to keep employee coverage affordable to attract and retain talent. Consequently, employers have shied away from cost-sharing initiatives to avoid disrupting recruitment efforts. As 2023 ended, the labor market showed signs that it is softening and, as a result, more employers may revisit cost-sharing initiatives to rein in rising healthcare costs in the upcoming year.
Many organizations have embraced offering personalized voluntary benefits as an integral part of their benefits strategy, and more employers will either embrace these benefits or expand their offerings in 2024. These benefits are popular with employees and allow employers to tailor their benefits to employee demands and needs. Bolstering voluntary benefits will be an effective way for employers to expand their benefits offerings without raising costs in 2024. Additionally, many employers will embrace a holistic approach to employee well-being to address employees’ physical and mental concerns. In 2024, inflationary pressures exacerbated many physical and mental health issues in the workplace. Employer efforts will include focusing on financial benefits and education to help reduce inflation’s impact on workers. Moreover, family-building benefits will become much more important for employers in the upcoming year as they try to meet employees’ benefit needs and demands.
Even though the labor market is expected to soften somewhat in 2024, it is still expected to remain competitive. Because of this, strategies employers have implemented to address the tight labor market over the last few years are changing. For example, in 2024, employers plan to increase employee compensation and adjust their recruitment strategies to focus more on skills-based hiring to find capable workers to fill open roles. Despite budgeting for compensation increases in the upcoming year and the fact these increases will be high by historical standards, it’s unlikely that they’ll meet employee demands.
Establishing proactive and resilient organizations will be critical for a successful 2024. Employers should ensure that they can quickly and effectively respond to challenges. For example, artificial intelligence (AI) has made its way into many workplaces, forever altering how employees work and employers operate. More employers are relying on AI for recruiting and hiring. While this allows organizations to lower costs and operate more efficiently, it presents certain challenges they must contend with in the upcoming year. Additionally, for the last few years, employers have tried to force and incentivize employees to return to the office, often with mixed results. Overall, employers are pushing for their workers to return in 2024, but going forward, they will likely focus on approaches and work models that balance employee demands with organizational productivity and efficiency. Organizations will also need to address anticipated regulatory changes, such as a new overtime rule, state-mandated leave policies and increased enforcement actions by federal agencies.
As employers read the Market Outlook, they should consider which trends they may be susceptible to in the upcoming year. Then, reach out to us to discuss the next steps and request valuable resources to help evaluate potential solutions and raise the challenges 2024 may bring. Together, we can meet the challenges and identified opportunities presented in 2024.
Read our 2024 Employee Benefits Market Outlook for more insights!
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