‘Look at these costs as an investment into our business'

Plan sponsors will continue to face a formidable foe this year: high costs that refuse to relent, according to HUB International’s recent benefits outlook.

The firm also found that while prescription drugs will remain the dominant expense, mental health claims continue to strain long-term disability programs. Consequently, new opportunities are also emerging, from generic GLP-1 medications to data-driven plan design, that could reshape how employers approach benefits this year.

"We continue to see rising costs related to prescription drugs. It's about two thirds of our extended healthcare costs for private sponsored plans. From a long-term disability perspective, we continue to see groups experiencing higher costs associated with mental health so a lot of those resonating issues that plan sponsors have experienced over the last several years have resonated and will continue to resonate through this year. But, certainly from an affordability perspective, there's lots of opportunity," said Phillip Benda, vice president of HUB International's employee benefits consulting practice.

Benda pointed to Ozempic and other GLP-1 medications that are coming off patent in Canada, which could bring cost savings similar to what happened when biologics like Remicade and Humira saw generic competition a decade ago. But he also cautions against expecting a quick fix.

"It's a complex drug and it's a complex marketplace in terms of the generics that are coming to market," he added.

While Benda emphasized that cost remains the most prominent issue for employers this year, he acknowledged organizations have multiple levers they can pull - both inside the benefits plan and at the broader enterprise risk level, to manage spending more intelligently. That includes building in wellness and preventative health measures to reduce future claims rather than waiting to react once costs spike.

He wants employers to stop seeing benefits solely as a drain on budgets and start recognizing where targeted investment can reduce future liabilities. That includes building in wellness and preventative health measures that can blunt longer‑term costs instead of reacting only after claims spike.

Still, he acknowledges there are certain expenses that sponsors “likely won't be able to influence,” and the task there is to “look at these costs as [an] investment into our business, rather than items on our balance sheet,” he said.

Benda also flags an area he believes is too often overlooked, notably around retirement and financial well-being. With updated CAP guidelines and growing demographic pressures, employers are being pushed to strengthen succession planning, retirement objectives and financial support offerings. He believes the link to broader health outcomes is real but is frequently missed in benefits conversations.

"Somebody's financial situation and financial health is very much a determinant of their well-being," noted Benda.

Benda believes plan sponsors can get more deliberate about how their drug spend is structured this year. He sees meaningful room to revisit and redesign drug formularies, with more employers becoming comfortable exploring alternative models that can shift costs without causing major disruption for employees. He emphasized that plan sponsors should be looking to reallocate limited benefits dollars in a way that protects members while easing budget pressure.

According to HUB’s report, having a strong and resilient benefits strategy will help strengthen employee vitality during a time of uncertainty. When asked what that could look like, Benda pointed to a strategy that’s built on hard data around health and disability claims, short‑term and salary continuance leaves, medical leaves and other workforce indicators.

Additionally, extended health claims, disability experience, short-term and salary continuance leaves, medical leaves and other related data sets are all integrated to show what is actually driving costs and risk in the group.

This helps show employers what is actually driving their cost trends and where key risks sit in their population. And that integrated view then shapes plan design. Historic patterns become the basis for tailoring benefits offerings, and newer tools, including AI, are used to analyze the data and refine strategy.

As employers focus more on equity, diversity and inclusion, he expects continued growth in targeted offerings for different workforce segments, such as dedicated women’s health solutions that surged in the past year.

“We're going to continue to be very focused on building plans that are focused on individuals, that are focused on different personas within employers workforce. And I think ultimately that'll help,” emphasized Benda. “We need to make sure that when we look at a benefit plan, we're not just capturing people's drug needs. We're also capturing their holistic health needs.”

Benefits over income?

Meanwhile, employee priorities are shifting in ways that make benefits far more influential than they used to be. Despite ongoing challenges in the market, Benda believes benefits are steadily rising on workers’ lists of what matters most at work, creating an opportunity for employers to shape engagement, satisfaction and day‑to‑day work experience through their plans.

He links this shift partly to how benefits have evolved. Modern programs can now reach a wider range of demographics and life stages, rather than serving a narrow, uniform profile. According to Benda, engagement survey results show that benefits are now competing directly with, and in some cases outranking, compensation adjustments as a key concern for employees.

He also thinks employees are becoming more financially savvy about the value embedded in their plans. When faced with a trade‑off between extra cash and additional benefits funding, more people are recognizing that benefits can deliver greater practical value than a small, taxable salary increase.

"There's a lot of opportunity to use benefits that have a meaningful impact on an employee's engagement, satisfaction, and how they work within a company,” noted Benda.