Why Employee Benefits Trends Matter: Insights from the State of Employee Benefits Report

June 1, 2026

Two employees review multiple computer monitors displaying data dashboards with charts and graphs, with one person pointing to a visual trend during a discussion in a modern office.

Each year, Benefitfocus takes a deep dive into its customer enrollment transactions and its continued monitoring of trends in the employee benefits ecosystem to provide you with insights on the current state of the benefits industry and where the industry is heading. Repeating last year’s methodology, Benefitfocus also tapped into de-identified health claims data from approximately 600,000 employees and their dependents to analyze medical and prescription drug trends.

In essence, it’s all about the trends!! Studying the trends in health benefits is critical because “trend analysis” helps employers, employees, brokers, and even policymakers understand how costs, access, incentives, legal obligations, and health outcomes evolve year-over-year. The following provides a summary of the Benefitfocus State of Employee Benefits Report 2026 (“2026 Report”), along with a deeper discussion of how important trend analysis is for supporting low health plan costs.

Report Summary

This year, the 2026 Report kicks off highlighting trends that drive up costs. Benefitfocus broke down these cost-drivers into the following categories:

Cost-Driver #1: Sub-Optimal Benefits Usage

Here, Benefitfocus uncovered an important trend – 64% of non-emergency care was treated at an emergency department. This is a big deal because emergency department-related claims can cost an average of 400% higher than an office visit claim.¹ And, because these medical episodes were non-emergent, 64% of these emergency department visits could have been treated at lower-cost, non-emergency facilities, such as primary care or urgent care. What can employers and brokers do to help address this trend?

Educate employees and emphasize preventive care.
Engage employees directly and inform them of the benefits of seeing a primary care doctor and establishing a primary care relationship that employees can rely on, instead of defaulting to higher-cost emergency department visits.

Policy Changes: Encouraging Employees to Access Preventive Services and Direct Primary Care

The Affordable Care Act requires employer-sponsored health plans to provide free coverage for certain preventive services.² Employer-sponsors and brokers should be communicating the availability of this coverage benefit to employees.

The One Big Beautiful Bill Act now enables employees enrolled in a high-deductible health plan (HDHP) to access Direct Primary Care (DPC) services without losing eligibility to contribute to a health savings account (HSA)2. Additionally, DPC fees can be paid with tax-free HSA dollars³, although it’s important to note that certain services are excluded from DPC arrangements, such as procedures requiring general anesthesia. 3Employers and brokers can highlight these changes in the law to encourage more employees to access Direct Primary Care services, and highlight the favorable tax treatment this law now enables to help incentivize more employees to develop a primary care relationship by joining a Direct Primary Care arrangement.

Cost-Driver #2: Chronic Conditions Management

In my opinion, this is the most meaningful trend to pay attention to. Why? Because Benefitfocus found that 1% of the approximately 600,000 employees and their dependents that were analyzed accounted for 33.4% of the employers’ overall health care spending to treat chronic conditions (both medical and pharmacy treatments). We have seen statistics indicating that 5% of our nation’s population utilizes about 50% of the health care in our country.⁴ While Benefitfocus’ finding is consistent with the general statistic, Benefitfocus’ finding is arguably more worrying. Here are some strategies to consider:

Employers and brokers can help employees make informed choices about providers and treatments and medications that enable earlier intervention.
Importantly, employers can analyze their health claims data every year to identify spending on specified chronic conditions and then adopt a cost-containment program that is specifically designed to help employees better understand and manage these chronic conditions.

Policy Changes: Providing Flexibility for Better Managing Chronic Conditions

The Federal government is acutely aware of the high cost of chronic conditions. Back in 2019, the Internal Revenue Service (“IRS”) issued guidance allowing HDHP-HSA plans to provide coverage for certain treatments for chronic conditions before the HDHP’s deductible is met.⁵ Here, the IRS recognized that the law needs to provide flexibility for employer-sponsored health plans so employers can help employees with the greatest health needs.

The market is also responding. Over the past decade, there has been a growth in the number and types of cost-containment programs now available to employers, ranging from programs aimed at helping employees with their dialysis treatments to programs specializing in helping employees with hyper-tension and respiratory disease.⁶

Cost-Driver #3: Rising Pharmacy Spend

Over the past decade, pharmaceutical expenditures have emerged as the predominant driver of accelerated healthcare spending growth.⁷ That is why tracking this trend year-over-year is so important. Because rising prescription drug costs not only have a significant impact on an employer-sponsor’s bottom-line, increased prescription drug spending may put pressure on employees to choose between medications and basic needs, jeopardizing their health and finances. How can this trend be addressed?

Develop thoughtful cost‑management strategies that includes alternative sourcing, capped co-pays, and education about therapeutic alternatives. By embracing these strategies, employers and brokers can help empower employees to reduce pharmacy spend, foster medication adherence, and achieve optimal health outcomes.

Policy Changes: Helping Evaluate the Reasonableness of Compensation Paid to Plan Service Providers

Related to the trend of pharmacy spend is the ongoing analysis of the fees and compensation paid to service providers in the prescription drug supply chain. Congress and the Department of Labor recently changed the law to require service providers furnishing “pharmacy benefit management services” to a self-insured plan to disclose specified compensation streams to the plan fiduciary.⁸

While this change in the law has not yet taken effect, employers are still obligated under the Employee Retirement Income Security Act (“ERISA”) to analyze and evaluate whether the plan is paying reasonable or excessive fees to, for example, a Pharmacy Benedit Manager (“PBM”) or a Third-Party Administrator. Failure to do so could result in fiduciary liability for the employer.

The Trends, the Trends, the Trends

Analyzing health benefit trends offers an early warning system for where the health benefits market is heading financially, clinically, operationally, and legally. Trend analysis can help support the following business areas:

Fiduciary Duties – Employers must study and analyze year-over-year trends because they have a fiduciary duty under ERISA to keep health plan costs low and act in the best interest of plan participants. Employers also have a fiduciary duty to monitor the plan’s service providers to make sure that these service providers are spending plan assets efficiently and not wasting plan assets or mistakenly overpaying for health claims. Employers must also make sure that these service providers are being paid reasonable (as opposed to excessive) fees, which – as noted above – is a big focus in Washington, DC these days.⁹
Wages and Hiring – Trends must be analyzed for corporate budgeting purposes, determining wage growth, and also hiring decisions. Employers offer health benefits to attract and retain qualified workers. A comprehensive and cost-effective plan design is a critical attraction and retention tool. As a result, trend analysis – coupled with working with a trusted advisor – can help the employer do just that. In addition, we all know that employer contributions for health benefits is effectively compensation. If health care costs continue to rise, and if employers choose to shield their employees from these cost increases (like Benefitfocus identified in the Report), that will be expected to have an impact on employees’ overall wages.
Optimal Prescription Drug Spending – Trends also reveal structural problems in the health care ecosystem. For example, when it comes to prescription drug spending, the study of pharmacy trends can identify how traditional rebate-driven PBMs favor high-list-price drugs over lower-cost alternatives like generics and biosimilars. Also, studying trends can identify increased spending on specialty drugs and gene and cell therapies, which carry with them very high costs for the employer.
Employee Wellbeing – Employees also benefit from trend analysis through actions taken by their employer. Here, employers may change the deductible and cost-sharing amounts to shield employees from increased out-of-pocket spending. As noted above, employers may also choose to increase their employer contributions for health benefits to protect employees from the ever-increasing cost of health care. As also noted, employers may identify trends relating to chronic care conditions and/or prescription drug spending, and the employer may adopt useful cost-containment programs or offer value-based insurance designs that include reduced cost-sharing for employees choosing a low-cost, high-value medical provider.
Innovative Plan Designs – Related to this last point, trend analysis allows an employer to be creative with the design of their health plan offerings as a way of better managing the employer’s health care spend. This includes innovative value-based care contracting with drug manufacturers, actively participating in the development of the plan’s drug formulary to favor generics and biosimilars over high-cost drugs through financial incentives, and even developing strategies to leverage Artificial Intelligence and risk-sharing models.

For a deeper look at these trends, download the full Benefitfocus State of Employee Benefits Report 2026.

1 Based on data taken for the State of Employee Benefits Report; the 2025 average cost of emergency department per claim ($497.67), in which multiple claims make up a single visit, and the 2025 average cost of office visit per claim ($99.22).

2 See Section 2713 of the Public Health Service Act.

3 Id. Note, this favorable tax treatment is not available to Direct Primary Care arrangements that charge a monthly fee that exceeds $150 for singles and $300 for families (these amounts are indexed to inflation). Also, Direct Primary Care arrangements cannot furnish: (1) procedures that require the use of general anesthesia, (2) prescription drugs (other than vaccines), and (3) laboratory services not typically administered in an ambulatory primary care setting.

4 See Agency for Healthcare Research and Quality, Concentration of Healthcare Expenditures and Selected Characteristics of People with High Expenses, United States Civilian Noninstitutionalized Population, 2018-2022, Statistical Brief #560, March 2025; see also Kaiser Family Foundation, How Do Health Expenditures Vary Across the Population, March 2, 2026.

5 See IRS Notice 2019-45.

6 American Journal of Law & Medicine 47, no. 4, Employer-Led Strategies to Improve the Value of Health Care, Oct. 5, 2021.

7 Mercer, National Survey of Employer-Sponsored Health Plans, Nov. 17, 2025; see also, Business Group on Health, Taking Action on Health Care Costs: A Business Group on Health Viewpoint, March 3, 2026.

8 See Section 6702 of the Consolidated Appropriations Act of 2026; see also, 91 Fed. Reg. 4348, Improving Transparency Into Pharmacy Benefit Manager Fee Disclosure (Jan. 30, 2026).

9 Note, ERISA does not define what “reasonable” or “excessive” fees means, but the term “reasonable” is generally understood to mean fees that are appropriate in light of the services provided, the market value of those services, and the service provider’s qualifications and responsibilities at the time a service agreement is entered into and monitored by the plan sponsor. As a corollary, “excessive fees” generally refer to fees paid by a plan to a service provider that exceed what is reasonable for the services provided. See, 29 C.F.R. § 2550.408c-2(b)(1); see also, Cunningham v. Cornell University, 604 U.S. 693 (2025).

The State of Employee Benefits 2026 was compiled from enrollment transactions aggregated across 316 large employers (1,000+ full time employees) within the Benefitfocus customer base, representing more than 1.8 million employees in total. The data was evaluated on an anonymous basis. Enrollment records include both active and passive enrollments made by a variety of industry roles (employee, carrier representative, broker, benefits administrator, etc) from the fall of 2023 through fall of 2025 for plan year effective dates of January 1. These measurements are not meant to be a nationally representative sample, but to represent the aggregate activity for large employers on the Benefitfocus platform.

For data related to medical and prescription drug claims, Benefitfocus drew from 68 employers in our Health Insights Platform with a total population of approximately 600,000 employees and their dependents. Claims were assessed based on claim service dates from 1/1/24 through 12/31/2025, for year over year comparison periods. Population Health data was compiled using Johns Hopkins ACG® System (version 14.0.1). The underlying claims demographics and claims were sanitized per HIPAA Safe Harbor guidelines and were filtered to exclude generations older than Baby Boomers to comply with the age 90 cutoff mentioned in section (3) of “Guidance on De-identification of Protected Information. November 26, 2012” which cites the Code of Federal Regulations Title 45 §164.514(b)(2)(i)(C).”

The information provided does not, and is not intended to, constitute legal advice; instead, all information and content herein is provided for general informational purposes only and may not constitute the most up-to-date legal or other information. Benefitfocus does not act in a fiduciary capacity in providing products or services; any such fiduciary capacity is explicitly disclaimed. This summary is provided by a consultant to Benefitfocus.com, Inc., and any opinions expressed within do not necessarily reflect those of Benefitfocus.com, Inc. or its affiliates and are not intended to provide specific advice or recommendations for any plan or individual.

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