Transforming Employer Health Benefits for Large Employers: An Analytical Perspective

Employers are the largest purchasers of health insurance in the United States, representing approximately 165 million lives and more than $800 billion in healthcare expenditures. Large employers—those with more than 10,000 employees—are often innovators when it comes to benefit offerings, shaping the trends that are later adopted by small and medium-size employers. Every year, large employers submit about 300 requests for proposal (RFPs) to health insurance carriers, according to our research. They also account for $16 billion to $24 billion in potential revenue for healthcare partners, including health insurance plans, healthcare professionals, and other healthcare companies.

Unprecedented external pressures are affecting how employers approach benefit offerings

Three factors have increased the complexity of navigating employer health benefits:

Changing dynamics. Commercial healthcare costs are expected to rise by 9 to 10 percent annually from 2024 to 2026, and tariffs are expected to affect this cost further. As a result, employers are facing significant cost pressures as they design health benefits for next year. Some group segments and geographies could see rates increase by more than 10 percent per employee.

As a result, employers—especially large ones—are pivoting from their traditional place in the back seat to take an activist role in health benefits. They are working with their partners (brokers, health plans, and other healthcare system stakeholders) to redefine their offerings.

Employers are adopting an activist role—and a growing appetite for disruptive solutions

As healthcare companies adjust to these external factors and strive to preserve employee well-being, several relevant trends have emerged among large employers.

Employers are budgeting for only a fraction of the expected cost increases. According to the 2024 McKinsey Employer Benefits Survey, large employers cited costs as their number-one concern when designing a benefits package, and costs accounted for 66 percent of an employer’s purchasing decision in 2024. But many employers are making conservative projections for the increase in medical costs per employee.

Employers are interested in alternative insurance design solutions. According to our survey, among jumbo employers (companies with more than 25,000 employees) that have considered value-based insurance design models, more than 85 percent indicated a strong interest in innovative models such as flexible co-payment design and first-dollar deductible plans.

Three strategies help healthcare companies take employer partnerships to the next level

Redefining the sales playbook: Using data, AI, and demos to deliver value to employers

Many healthcare organizations focus on sales efforts during the run-up to RFP season, often in the second and third quarters of the year. Healthcare companies can demonstrate and reinforce their value proposition during off-cycle interactions with distribution partners and employers to more consistently communicate their value proposition year-round.

Bolster new business development with digital insight. Healthcare companies can use a systematic, data-backed process to build a more complete view of potential customers’ goals, preferences, and relationships.

Double RFP speed to market using AI. Healthcare companies can accelerate RFP responses by coupling RFP software with gen AI capabilities, allowing them to draft a response in minutes rather than days.

Hypercustomize RFP responses

Decisions for employer benefits are often made by a group of individuals at an organization, each with particular preferences and goals. Healthcare companies can be successful by predicting and addressing the unstated challenges of employers.

Seek opportunities beyond the scope of the proposals. In addition to quoting for products and services outlined in the RFP, healthcare companies can use product-matching tools to offer high-value, relevant products to accounts based on specific employer characteristics.

Move from fixed to pay-for-performance pricing

Employers view cost as the greatest hurdle in offering a benefits package and seek partners that can align financial incentives.

Move to value-aligned pricing. Healthcare companies are moving away from traditional sources of revenue, such as flat administration charges or fees per engaged member, and toward shared-value revenue streams.

FAQ

Q: What are the key factors influencing employer health benefit offerings?

A: The key factors include changing dynamics in healthcare costs, an appetite for disruptive solutions, and a more complicated ecosystem of healthcare partners.

Q: How are employers approaching cost increases in healthcare?

A: Employers are making conservative projections for cost increases per employee and are seeking alternative insurance design solutions to manage costs.

Conclusion

The evolving employer market landscape, shifting employer priorities, and changing behavior for benefit purchasing could significantly change the status quo for stakeholders in the US healthcare system. Health plans, technology and service providers, and other healthcare companies can assess their readiness across sales effectiveness, product offerings, and capabilities to appeal to large employers and shape how the $800 billion employer benefits market could look in the next decade.