A new report has found that employers are increasingly wrestling with two challenges in their human resources departments: growing employee benefits fiduciary liability issues, and administrative difficulties in managing employee leaves.
Employers are facing lawsuits by employees who allege they mismanaged their health and wellness benefits, and recently enacted legislation has increased their fiduciary responsibilities, the 2025 “NFP U.S. Benefits Trend Report” found.
Additionally, firms are spending more time ensuring that employee leave requests comply with federal laws, their own state’s laws and their company policies.
The report highlights the importance of employers putting in place processes for vetting vendors and taking steps to comply with federal and local laws to avoid penalties and lawsuits.
Growing fiduciary risk
A new class of lawsuit has emerged in the last year: Employees suing their employers over how they handle their health plans or for choosing vendors they allege do not have patients’ best financial interest in mind.
Any party with discretionary decision-making authority over the plan or plan assets must adhere to ERISA fiduciary standards and responsibilities, including acting solely in the best interest of plan participants and beneficiaries.
Recent legislative developments have expanded employers’ fiduciary obligations. The Consolidated Appropriations Act of 2021 introduced comprehensive reforms, requiring group health plans and insurers to enhance fee disclosures and pricing transparency.
These laws mandate that employers ensure their health plans are cost-effective, provide quality care, and comply with mental health parity and pharmacy benefit requirements.
The rules apply to all employer-sponsored plans regardless of the funding methodology selected, whether fully insured or self-insured.
As well, employers are facing legal challenges over allegations of that they or their health plans failed to properly vet pharmacy benefit managers, leading to inflated prescription drug costs for employees.
In parallel, there has been a surge in litigation where employees allege that employers have breached their fiduciary duties under ERISA.
Notably, class-action lawsuits have been filed challenging the imposition of tobacco surcharges in employer-sponsored health plans, asserting that such surcharges violate ERISA, the Affordable Care Act and the Health Insurance Portability and Accountability Act.
The NFP report recommends that level-funded or self-insured plans regularly review vendor contracts to ensure compliance with contract terms. This improves cost-containment provisions of the plan and is essential to proper plan oversight.
Leave administration headaches
Employers are increasingly struggling to manage the complexities of leave requirements thanks to a tapestry of federal and state laws, as well as company policies.
More than 70% of employers spend more than four hours on administration for each leave request they receive from employees to ensure they comply with the Federal Family Medical Leave Act.
Here’s why the administrative burden is so challenging:
Unpaid leave laws — The FMLA requires that employees can take job-protected leave for up to 12 work weeks for health reasons or to care for a family member with health issues. In addition to this federal law, states have their own laws that may expand the acceptable reasons for taking leave and providing additional time off.
Paid leave laws — These are typically at the state level, but there are a few cities or municipalities that require that certain time off should be compensated to some degree. Paid leave laws provide benefits that are typically for shorter-term absences, while mandated state disability or paid family leave benefits cover leaves for longer-term absences (serious health conditions).
More states are enacting laws that require employers to provide a certain amount of paid sick leave as well.
Employer leave policies— Many employers will also have their own in-house rules for leave. The most common, according to the report, are:
Medical — 68% of firms
Family care — 65%
Personal — 53%
Bereavement — 53%
Parental (bonding) — 34%
FML-like — 23%
The takeaway
With employers facing a significantly higher fiduciary compliance burden and with the threat of lawsuits, ensure that your human resources team conducts comprehensive evaluations, while also emphasizing cost management and optimizing plan performance.
The focus should be on insulating your employees against more costs than necessary. As your broker, we can help with this.
Meanwhile, administration of leave requests must be approached with care to ensure compliance with local and federal law, which takes time. If you have a large workforce, the report recommends implementing tools like technology-supported or outsourced leave management.
Another option is a third party administrator that is skilled at handling leave requests under local and federal law.
A new study has identified the top five health conditions that are driving the overall cost of group health plan outlays, and without which spending would actually be falling.
The report is enlightening, and employers can use the findings to offer programs aimed at education and prevention to help control their employees’ health care costs and cut into health insurance premiums paid by both employers and workers.
Inspecting its study data for trends, the Health Action Council (HAC) determined that 63% of its covered lives had at least one of five conditions that were driving health care costs. Most of these top five conditions are preventable or treatable with lifestyle modifications that employers can encourage.
Here’s a look at the five conditions and the burden they put on your employees and your company:
Asthma
Average costs paid per member of the HAC for asthma treatment are increasing on average 6.4% a year. This is one of the most prevalent health conditions in the country. Three important stats:
The incidence of asthma was 31% higher among women than men.
The incidence of asthma among African American covered lives was 20% more prevalent than among other races.
The average age of HAC members with asthma was 31.9, two years younger than the overall membership average age of 33.9.
Diabetes
Average costs paid per member of the HAC for diabetic treatment are also increasing 6.4% a year. Three important stats:
Diabetes was 20% more common in men than women among the HAC’s enrollees.
The average age of HAC plan enrollees with diabetes was 52.
Although Asian covered lives amounted to only 3% of the HAC enrollees, they had the highest incidence of diabetes of all racial groups.
Hypertension
Average costs paid per member of the HAC for hypertension treatment are increasing 6.3% a year. Three important stats:
Hypertension was 23% more common in men than women.
The average age among HAC enrollees with hypertension was 53.1.
The risk of African Americans developing hypertension was 63% more than for other races.
Back disorders
Average costs paid per member of the HAC for back treatment are increasing 3.4% a year. Three important stats:
Back disorders were 27% more common in women than men.
The average age among HAC enrollees with back disorders was 43.3.
Caucasian HAC members had 14% higher back disorder prevalence than other races.
Mental health, substance abuse
Average costs paid per member of the HAC for mental health and substance abuse treatment are increasing 2.7% a year. Three important stats:
Mental health and substance abuse problems were 39% more common in women than men.
The average age among HAC enrollees with mental health and substance abuse issues was 32.8.
Caucasian HAC members had 20% higher mental health and substance abuse issues than other races.
The takeaway
To help workers with these conditions, the report recommends:
Creating and implementing simple education and targeted wellness programs to address common conditions among your employees.
Instituting an exercise, stretch or meditation program at the beginning of a work shift to improve safety and decrease injuries. These types of practices are preventative and may decrease the severity of an injury if one occurs.
Evaluating benefit plan design for opportunities to implement continuum-of-care protocols. For example, employers can make chiropractic care or physical therapy mandatory for back disorders before moving to more aggressive treatments.
Covering medications for specific common chronic conditions as preventative care. Another option is to promote the use of patient assistance programs for medicines that may be excluded in your plan’s drug formulary.
Promoting virtual care for specific conditions; for example, mental health support if you have staff in rural areas.
Working with your health insurer or medical expert(s) to identify opportunities for provider outreach and education to your workers.
Two new laws which took effect Jan. 1, 2025 will ease the ACA reporting burden on health plan sponsors.
In a bipartisan effort, Congress recently passed the Employer Reporting Improvement Act and the Paperwork Burden Reduction Act, both of which outgoing President Biden signed into law.
The laws are aimed at making it easier for sponsors to comply with ACA requirements on Forms 1095-B and 1095-C, which provide information about health insurance coverage to workers and the Internal Revenue Service.
Both laws take effect immediately.
Forms explainer
Form 1095-C is issued by “applicable large employers” (ALEs) — those with 50 full-time or full-time-equivalent workers — to report the offer of health coverage, while Form 1095-B is issued by insurance providers, self-insured employers or small employers to report actual coverage.
Prior to 2025, plan sponsors were required to send these forms to all of their employees covered by their health plan by March 2. The due dates for transmitting the forms to the IRS are Feb. 28 (if filing on paper) and March 31 (if filing electronically).
Both forms help workers prove they comply with the ACA’s mandate that they carry health insurance and that an employer is complying with its obligations to provide coverage under the law.
What’s changing
There are four changes that benefit employers under the two new laws:
1. Forms upon request — Plan sponsors are no longer required to send Forms 1095-B and 1095-C to all full-time and covered employees. Instead, they will only be required to furnish them upon request from an employee.
Importantly, plan sponsors who want to go this route are required to notify their staff about their right to ask for a form.
2. Electronic forms — Starting this year, employers may furnish the forms to their employees electronically rather than on paper. The new law also makes it easier for employers to use a worker’s birth date instead of their Social Security number if the number is missing.
3. Reponse times to IRS letters — Another provision expands the time employers have to respond to a “employer shared responsibility payment” letter (Letter 226J) from the IRS, to 90 days from 30.
These demand letters are sent to employers if one or more full-time employees listed on the company’s Form 1095-C received a premium tax credit on his or her federal income tax return, meaning they secured insurance on an ACA exchange like healthcare.gov.
Employers have found it challenging to provide a response and a defense to the IRS within such a short window of 30 days. An additonal challenge has been that these letters are sent by U.S. mail, and it may take some time to reach the appropriate person in an organization after being received. Filing a response late can result in the employer being assessed a penalty when one isn’t warranted, in addition to further penalties.
4. Statute of limitations — One of the new laws imposes a statute of limitations for how far back the IRS can go to try to collect assessments for 1095-B and 1095-C reporting failures and mistakes. Prior to this, there was no statute of limitations.
The takeaway
The above changes will benefit plan sponsors by reducing the reporting burden as well as give them more time to respond if the IRS thinks an ALE failed to provide coverage as required by law.
Your HR department should be aware of these changes in order to take advantage of the them.
As health insurance costs continue to rise at an uncomfortable pace, employers in 2025 plan to shake up the status quo with their health care vendors, particularly those focused on reducing pharmacy spend, a main cost driver, according to a new report.
To address spiraling costs, they will also focus on educating their staff about the importance of prevention and immunizations and guiding them to use specialized services that focus on managing chronic conditions, says the “2025 Trends to Watch” report by the Business Group on Health (BGH).
Companies will also demand more data from their health plans and other health care vendors and look to float requests for proposals if they aren’t seeing results.
Here’s a look at the main strategies employers told the BGH they were likely to pursue this year.
Pharmacy spend
According to the report, if employers want to control their overall health care costs, they will have to address growing pharmacy expenditures, which now account for more than 25% of their health care budgets.
That percentage is forecast to increase with the advent of GLP-1 weight-loss and diabetes drugs like Wegovy and Ozempic, as well as specialized costly medications that can bust a health plan’s budget.
One-third of employers surveyed said they planned to revisit and reassess their pharmacy benefit manager relations, potentially holding new contract bids to get better pricing from current vendors or from new ones that offer competitive pricing and more transparency in their contracts.
GLP-1s loom large. Some employers are only willing to cover these drugs for diabetes and other Federal Drug Administration-approved indications like heart disease. Few will cover them for weight loss unless the patient is obese and with diabetes. Even then, they may require step therapy before prescribing them, which includes:
Trying other established and proven anti-obesity medications.
Engaging in lifestyle management programs.
Chronic conditions
Besides rising pharmaceutical costs, chronic and serious conditions such as cancer, heart disease, diabetes and autoimmune diseases are major contributors to high health care costs.
The report recommends a two-pronged approach to helping employees with chronic conditions: taking advantage of specialized integrated care networks, and wellness programs.
Specialty care — Many workers with chronic conditions are often not aware of the specialty care available to them through their health plan and as a result, don’t take advantage of these valuable services. The problem is that both employees and employers are often not aware of these specialty solutions that can improve staff health through care that provides valuable clinical support.
Employers surveyed by BGH said they would be focused on holding health plans, specialty insurance products and navigation partners accountable for helping their employees access this care.
“The first and most critical step is to address the lack of awareness of these new network-based solutions among employers as well as employees,” the report states.
Wellness plans — Chronic conditions are also prompting employers to revisit and evaluate their current wellness initiatives to ensure they are helping their employees manage these conditions and make lifestyle changes that can improve their illness.
Employers may start requiring vendors to agree to outcomes-based contracts that set expectations for results. “These agreements should require that vendors demonstrate improvement in health outcomes and deliver promised returns,” the report states.
The most popular wellness programs focus on helping employees lose weight and lead a healthier lifestyle through more exercise and healthy eating and habits.
To be successful, weight-management programs should use best practices and integrate treatments like anti-obesity medications and mental health services in their care models, the report says.
Getting control of plan costs
Employers will look to hold their health plans’ and benefits vendors’ feet to the fire for producing better health results at lower prices.
The key to this is employers having access to data from their health plans and other vendors that provides insights into cost and outcomes. This will be an evolving trend and some plans will be better than others in providing the desired information.
“Transparency of cost, quality and outcomes data is critical to both employer and employee decision-making; vendors will need to show how they enable access to this information in 2025,” BGH says in its report.
Additionally, employers that have sway with their insurers will push their health plans to get control on unit prices they pay for services, and press them to accept value-based contracts that reward for positive outcomes and quality of care.
Businesses that can afford it may contract directly with centers of excellence that provide very high quality or low-cost care, oftentimes for a particular service.
The takeaway
We know that the high cost of health care is weighing heavily and we are here to help you keep your health plan costs under control. It requires an integrated approach of pushing wellness and chronic condition management among your staff and evaluating your current vendors’ results.
The percentage of employers who are covering new and trendy weight-loss drugs has risen in 2024, continuing a trend of increasing coverage despite the costs, according to a new survey.
The study, by Mercer, also found that employers are increasingly offering to cover in vitro fertilization for employees who may be having trouble getting pregnant. And, as costs continue rising on average 5.25% in 2024, employers are taking a number of steps to manage costs.
The fastest-growing component of costs is pharmacy benefit costs, which were up 7.7% after rising 8.3% the year prior. One of the main drivers is diabetes and weight-loss drugs like Wegovy and Ozempic (both made by Novo Nordisk) and Zepbound (made by Eli Lilly).
But, while health plans will generally cover these medications for diabetes, not as many do for weight loss.
The survey found that 44% of employers with 500 or more workers cover weight-loss drugs like Wegovy and Zepbound, as well as older medications in the same class like Saxenda (made by Novo Nordisk). That’s compared with 41% in 2023.
Weight-loss drugs are covered by 64% of employers with more than 20,000 employees, up from 56% in 2023.
These drugs, known as GLP-1s, are contributing to a significant spike in pharmaceutical costs and adding to overall health care outlays. The full list price for Ozempic was $969 in the fall, down 9.7% from 2023. The list price for Wegovy was $1,349, down 2.5% from 2023, but still about 20% higher than it was in 2022.
Most commercial health plans and Medicare pay about $290 for Ozempic and $649 for Wegovy, according to an anti-obesity medication cost report prepared by the Department of Health and Human Services.
It should be noted that health plans that cover anti-obesity medications saw a 4.8 percentage-point higher increase in their pharmacy spend in 2023 than plans that don’t cover the drugs, according to a report by Segal Group.
As a result of costs, employers are requiring pre-authorization and trying to ensure that workers are first prescribed other effective and less expensive treatments. That requires clinical coordination between clinicians, pharmacy benefit managers and insurers.
Employers are also increasingly covering in vitro fertilization. The treatment was covered by:
47% of firms with more than 500 workers in 2024, up from 45% the year prior.
70% of organizations with more than 20,000 employees, up from 47%.
Employer strategies
Respondents in the Mercer survey were also asked to list their most important benefits strategies for the next three to five years. They ranked the following as either important or very important:
Managing high-cost claimants: 86%
Managing the cost of specialty drugs: 76%
Enhancing benefits to improve attraction and retention: 71%
Improving health care affordability: 66%
Expanding behavioral healthcare access: 64%
Enhancing benefits/resources to support women’s reproductive health: 48%
Offering high-performance networks or steering to high-value care: 45%
Increasing use of virtual care throughout the health care journey: 42%
Addressing health inequities/social determinants: 36%
The takeaway
An earlier survey by Mercer, released in September 2024, found that employers had expected a 5.8% increase in health insurance costs, even after implementing cost-reduction measures.
One way employers are trying to address both their and employees’ costs is by offering their employees more plans to choose from. In 2024, two in three large employers offered three or more plan choices, up from six in 10 in 2023.
As well, the country’s largest employers offer an average of five options, compared to four in the year prior.
The Mercer survey concluded that employers would have to balance two priorities:
Focusing on health care affordability and ensuring that their staff can afford their copays, coinsurance and deductibles.
Managing their plan costs to keep employees’ share of premium reasonable and ensure that the benefits package is within the organization’s budget.
New guidance issued by the IRS expands the types of preventive care benefits that high-deductible health plans are required to cover with no out-of-pocket costs on the part of plan enrollees.
The changes are aimed at reducing out-of-pocket costs for diabetes-related expenses, certain cancer screenings and contraceptives. The guidance, released in two notices — N-2024-71 and N-2024-75, — can result in real savings for Americans.
Benefits under HDHPs typically do not kick in until the enrollee has met their deductible. However, these plans are required to cover a number of preventive care services, as outlined by the Affordable Care Act, without any cost-sharing on the part of the health plan enrollee.
Under notice 2024-75, the following are considered “preventive care,” meaning that HDHPs will be required to cover them at no cost to their enrollees and even before they’ve reached their deductible:
Breast cancer screenings for individuals who have not been diagnosed with this type of cancer.
Continuous glucose monitors for individuals diagnosed with diabetes. Covered monitors must measure glucose levels using a similar detection method or mechanism as other glucometers.
Insulin products, whether they are prescribed to treat an individual diagnosed with diabetes, or prescribed for the purpose of preventing the exacerbation of diabetes or the development of a secondary condition.
Oral contraceptives (including emergency contraceptives) and condoms.
The above will be added to the other preventive care expenditures that health plans are required to cover under the ACA.
Under notice 2024-71, flexible spending arrangements, health reimbursement accounts and health savings accounts will be required to reimburse for the cost of condoms.
The takeaway
If you offer HDHPs, HSAs, HRAs or FSAs, consider sending out a memo informing your employees of the changes, which are designed to help reduce their out-of-pocket medical expenses.
You should also add the changes to your benefits manual so that your staff know what they are entitled to.
If you are a self-insured employer, you should ensure that your third party administrator is aware of the changes to coverages by HDHPs. As well, plan materials for employers who choose to reimburse the cost of male condoms should ask their administrator to update the plan materials for FSAs, HRAs and HSAs.
