By John M. Bremen | July 9, 2025
Our 2025 Global Medical Trends Survey reported increases in medical costs are projected to remain high at a double-digit global average, continuing the trend of recent years. Our new Benefits Trends Survey reveals that effective leaders are transforming how they think about the issue amid rising costs, economic instability and employees demanding more support and benefits personalization. These leaders are spending smarter, recalibrating programs, sharpening their focus and using benefits as a strategic tool to drive employee engagement, retention and company purpose.
Several major factors contribute to continued high medical costs beyond general inflation:
Effective boards and senior leadership teams take the following actions to optimize benefits and drive better health and wellbeing outcomes:
01
The costs of employee benefits have surged in parallel with employee wellbeing remaining a core business issue, with demonstrated links to individual and business performance. Further, employees continue to value benefits from a retention and engagement perspective: According to our most recent Benefits Attitudes Survey, more than half of employees globally say their benefits are an important reason they stay with their current employer.
In 2025, effective leaders manage budgets strategically using a two-part strategy that, when done right, can reduce spending while improving employee support. These leaders improve vendor relationships, renegotiate contracts, use preferred provider networks, explore new pricing models, monitor carriers and pharmacy benefit managers, push for transparency and seek partners that deliver measurable outcomes. They also tackle the most expensive health conditions (e.g., mental health, cardiovascular issues and cancer) through targeted programs that prevent avoidable claims and improve health outcomes.
02
According to the new survey, over the next three years more than half (57%) of employers plan to reallocate or rebalance their benefit spending, adding or enhancing some benefits while reducing or removing others.
When recalibrating, effective leaders carefully consider employee needs and optimize the value each benefit brings to the organization. They also create an enhanced employee benefits experience that includes improved benefits administration and operations. They tailor and implement communication strategies that enhance employee understanding and reactions to changes.
03
With labor market conditions stabilizing in some regions and more employees electing to remain in their current jobs, concerns regarding talent availability have moderated. However, demographic shifts (aging populations, shrinking talent pools) and labor shortages in key skill areas cause talent challenges to remain a key influence on benefit strategies. Fifty-six percent of employers report that competition for talent is a key business issue influencing benefit strategy for 2025.
Effective leaders make benefits more employee-centric and increasingly plan to use benefits to reflect their company's purpose and values — rising in focus from 30% today to 41% in three years. Rather than simply matching the market, effective leaders make benefits a core part of how they differentiate their companies (including being part of a clear value proposition to employees). They connect emotionally with their people via enhanced support, employee engagement and tailored communication and articulate how benefits support their employees' unique priorities and reflect the organization's broader values.
04
Against the backdrop of managing costs and recalibrating benefit spending, effective leaders become more targeted in how they support employees, focusing on the issues that matter most to both employees and the company. These leaders use listening strategies and advanced analytics to assess their benefit programs for impact, expanding those that directly alleviate employee pressure points, while trimming low-value benefits.
For example, they understand that mental health is a top issue for 2025, with the growing impact of mental health challenges on engagement, absenteeism and health claims. They also understand that financial resilience is a growing concern as cost-of-living issues increase for employees.
05
Employees are increasingly focused on workplace flexibility, from work arrangements to benefits. Employees want flexibility in reflecting their personal circumstances in benefits that are as individual as their needs. Employers are responding: 38% globally offer moderate or high benefit choice today, and that figure is expected to double to 76% within three years.
Effective leaders redesign their benefits to allow optimal benefit choices based on income, family situation, financial security and potential tax implications. This may include providing choices in healthcare coverage levels, provider networks, voluntary benefits or allowing optional enhancements to current benefits or full flexible benefit allowances.
Effective leaders prioritize delivering even more value from existing programs through meaningful decision support, including digital navigation tools and enhanced education. This helps employees navigate and use benefits more effectively by knowing what's available, how to use it and why it matters.
Effective leaders are rethinking benefits by doing what matters most and doing it better. As they manage the challenges of 2025, one message is clear: The old rules are changing, and effective leaders use benefits as a strategic tool to drive engagement, retention and purpose.
A version of this article originally appeared on Forbes on June 30, 2025.
