In 2023, employers were forced to confront several new and enduring challenges, including rising health care 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 health care costs while keeping benefits affordable for employees. Reining in rising health care costs has been a major employee benefits challenge for employers for many years. However, health care 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 health care cost increases. Employers have traditionally shifted increasing health care 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 health care 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.
2024 Outlooks
The following resources explore important trends and challenges employers should monitor in 2024, discussing why they’re important and how they might impact employers. These trends will likely impact and shape the employee benefits market throughout the upcoming year and beyond.
- Managing Rising Health Care Costs in 2024: Amid ongoing inflation pressures, employees and employers alike can expect their health care costs to increase in 2024. This article outlines the primary drivers of 2024 health care costs and strategies for employers to manage them.
- 2024 Shifting Labor Market and Talent Trends: Attraction and retention challenges remained persistent in 2023 as organizations across industries struggled to find and keep workers. Looking ahead to 2024, labor markets are expected to remain competitive yet ease up compared to what employers have experienced since the beginning of the COVID-19 pandemic. This article outlines what employers should understand about the shifting labor market and talent trends in 2024.
- Continuing Litigation and Compliance Challenges: New regulations combined with continued workforce demands mean employers will likely see an increase in employment-related lawsuits and action from federal, state and local agencies in 2024. According to research from the BTI Consulting Group, employment litigation is expected to increase by 6.8% in 2024. Class actions and cybersecurity litigation are also expected to increase significantly in 2024 (7.5% and 9.9%, respectively). These types of lawsuits are becoming costly and more complex each year, and as a result, employers are likely to experience increased compliance burdens and costs in 2024.
- Paid State Leave Laws Expanding: In 2024, paid leave laws will likely become more widespread as more states and local governments pass related legislation. This means more organizations will be subject to paid leave requirements in the upcoming year, increasing employers’ compliance and administrative burdens. This article highlights how paid state leave laws are changing in 2024 and how those laws will likely impact employers.
- Increased EEOC Activity Expected in 2024: The U.S. Equal Employment Opportunity Commission (EEOC) experienced several noteworthy changes in 2023, including new leadership, structural changes and an increased budget. It also multiplied its enforcement efforts. These efforts are likely to continue in 2024. This article outlines the EEOC’s increased activity in 2023 and how employers can minimize their exposure to the agency’s increasing enforcement actions in 2024.
- Managing Costly Prescription Drugs and Gene and Cell Therapy in 2024: Employers’ health plans have increasingly been pressured by rising prices of new specialty drugs and existing ones—and pharmacy costs are not expected to slow down this year. Two specific specialty drug trends are propelling the increase of specialty drug spending: Weight loss drugs and new cell and gene therapies are receiving accelerated approvals. This article explores the rise of specialty drug and treatment costs and strategies for managing them in 2024.
- Preparing for the DOL’s Proposed FLSA Overtime Rule: On Aug. 30, 2023, the U.S. Department of Labor announced a proposed rule to amend current requirements that executive, administrative and professional employees must satisfy to be exempt from the Fair Labor Standards Act’s minimum wage and overtime requirements. This article provides an overview of the proposed overtime rule, highlights potential changes the new rule could bring and outlines preparations for employers.
- Improved Access to Mental Health Care: On July 25, 2023, federal agencies released a proposed rule to strengthen the requirements of the Mental Health Parity and Addiction Equity Act (MHPAEA). This Legal Update summarizes the proposed rule.
- Embracing Innovative Solutions for Student Loan Debt Relief: Student loan debts can have a significant impact on employees’ mental, physical and financial wellness. When student loan debt causes stress to employees, it can reduce workplace productivity and lead to high rates of turnover as employees seek employers with better loan assistance programs or higher compensation packages. As a result, employees are increasingly looking to their employers for student loan assistance. This article outlines debt relief solutions employers are embracing in 2024.
- Increased Adoption of Fertility, Reproductive Health and Family-building Benefits: Reproductive health care became a key issue for employers in 2023. This trend is likely to continue into 2024 as employers continue to navigate the complex legal environment surrounding reproductive health. This article highlights important fertility, reproductive health and family-building benefits trends employers should be aware of in 2024.
- Improving Access to Preventive Care Services: Once an underused component of health care that aids both employees’ health and employers’ health care spending, preventive care is now a centerpiece of health benefits. Preventive care can help detect or prevent diseases and medical problems before they become more serious. It may also be used interchangeably with “routine care” and includes screenings, annual checkups, immunizations and counseling.
- Shifting Dynamics Leads to More In-person Work: Many employers have instructed employees to return to the office, either full time or for a specified number of days per week. Despite employers’ efforts, many employees have refused to return to in-office work. The return-to-work battle that has been simmering for the last few years seems to be nearing a boiling point, leaving many employers in a difficult position. This article explores why employers are struggling with return-to-office orders and what they can do about it.
Many of the workplace challenges employers dealt with in 2023 will continue through 2024 and beyond. While some of these challenges are familiar, others are not. Consequently, employers may need to operate more effectively and efficiently to set themselves apart from their competition. This will likely require employers to proactively embrace and simultaneously respond to the evolving employee benefits market. Critical to employers’ success in 2024 will be protecting workers’ health and well-being, accommodating employees’ needs and desires, embracing cost-effective strategies, and prioritizing attracting and retaining skilled workers.
Organizations that prepare and act quickly will stand out in today’s competitive market. This may also allow them to weather the challenges this year may bring and position themselves for sustained growth and success. The best strategies will vary by workplace, but being aware of the trends and themes presented in this Market Outlook can guide employers as they plan and establish benefits strategies in 2024.
Contact us for more information about these trends and to request additional resources on these and other important workplace topics.
This article is not intended as legal or professional advice.
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