Benefits balancing act: Employers struggle to offer affordable, attractive packages

Providing an attractive benefits package at an affordable price remains a challenge for employers.

“Trends in the employee benefits market tend to reflect what’s happening socially and economically, and this year is no exception,” said Sally Prather, executive vice president and national employee benefits practice leader for Alera Group. “As brand-name specialty medications continue to dominate the headlines, employers are faced with how to address the growing demand for these high-cost drugs with the complexity of the pharmaceutical marketplace.”

Alera Group’s 2024 Employee Benefits Benchmarking Report found that more than three-fourths of survey respondents offer medical, dental, vision and life/accidental death and dismemberment benefits. The number and types of benefits vary by employer size and, not surprisingly, larger employers offer a greater variety of products and are more likely to offer supplemental products such as pet insurance.

Employers looking to increase the perceived value of their benefits might consider offering more supplemental benefits, which often are viewed favorably by employees.

“Today’s employees are seeking additional coverage beyond the basics of health insurance,” said Tina Santelli, vice president of voluntary benefits and enrollment solutions for Alera. “Critical illness coverage, disability income and accident insurance are among the supplemental benefits that employees are increasingly prioritizing, because such benefits often offer better value than if employees were to buy this coverage privately. These benefits provide a sense of financial security and peace of mind, contributing to higher levels of job satisfaction and loyalty in today’s fiercely competitive job market.”

Among other key findings of the study:

• Medical plan rates increased but dental rates remained steady. Nearly 8 in 10 medical plans in the survey experienced a rate increase of around 9% on average, but dental rates remained steady from the previous year, with few increases.
• Pharmacy tiers have increased. The number of employers offering five pharmacy tiers increased as employers continue to struggle with pharmacy rate increases and the high cost of specialty medications.
• Employers are offering more choices. Employers offer an average of five different benefit types, with larger organizations offering even more benefits, including supplemental plans.
• Self-funding is on the rise. With health insurance premiums continuing to rise, this year’s data reflect a shift in the number of employers with more than 100 employees migrating to self-funding.
• Benefits eligibility varies. Eligibility requirements vary widely across industries and by employer size.

Related: Balancing benefits and costs: a struggle for employers

The results of this year’s report point to opportunities for employers who can provide innovative benefits solutions in an uncertain economy.

“Lingering inflation is also having an impact on employee benefits as employers are challenged with balancing the impact of rate increases on stretched household budgets,” Prather said. “Employers are hungry for innovation in their benefits.”