How to level set clients in an unpredictable market

As we move into a new year, the landscape for employee benefits brokers and consultants is becoming increasingly unpredictable and more complex than at any other time in the past decade. It is also becoming even more expensive. Aon predicts that employer-sponsored plans will surge about 9.5%, the highest since 2011. 

Economic pressures, regulatory uncertainty, workforce demographic shifts and structural changes in the healthcare and insurance markets are converging all at once. For brokers and consultants, this means navigating an environment that will require not only technical expertise, but also proactive communication and a willingness to adopt new strategies. Before looking ahead, it is essential to understand the forces shaping the market today. 

Factor #1: A disruptive individual market

One of the most consequential areas of disruption is the individual insurance market. Two major developments are influencing employer strategy and broker planning. First, the publicly financed and federally supported markets — Medicare Advantage and the Affordable Care Act (ACA) marketplace — are experiencing significant turbulence. Carriers are exiting certain geographies or eliminating product lines, either due to margin pressures, regulatory shifts or operational challenges. Compounding this has been uncertainty surrounding the continuation of ACA subsidy levels. This type of ambiguity makes long-term forecasting nearly impossible.

Secondly, in several regions, individual market plans, especially ACA-subsidized offerings, are being priced more competitively than employer-sponsored small-group plans. This development is opening the door for some employers, particularly smaller, micro-sized businesses with tight budgets, to rethink their role as benefit providers. A growing number are exploring models that provide employees with a cash stipend to purchase coverage on their own. 

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While this consumerism approach can offer flexibility, it assumes employees have adequate knowledge to evaluate networks, deductibles and specialists. Despite decades of education and a push towards healthcare consumerism, this is still an overwhelming task for the majority of employees today. Without expert advice and guidance, employees may inadvertently select inadequate plans, creating dissatisfaction later.

Factor #2: Limited flexibility in insurance and reinsurance pricing models

There is a persistent belief that insurers and reinsurers have broad flexibility to adjust pricing models from year to year. However, real-world market experience indicates otherwise. The reinsurance marketplace is hardening and will likely remain that way for the next 12 to 24 months.

Multiple reasons have caused this limited flexibility, including instability in the employment market, higher medical and pharmacy utilization patterns, increased volatility in high-cost claims and rising severity in chronic and complex medical conditions.

These realities have been built directly into actuarial pricing assumptions, leaving little room for downward adjustments. Brokers should expect continued rate pressure across both fully insured and self-funded segments.

Factor #3: Ongoing pharmaceutical cost increases

Within an employer-sponsored benefit plan, pharmaceutical expenses demand an increasingly higher percentage of the overall medical expense. A decade ago, pharmacy costs typically represented only 5% to 7% of total claims spend. Today that figure often exceeds 18%, and in many cases, climbs even higher.

Several trends are driving this increase. The aging workforce, along with a higher prevalence of chronic diseases, is one reason costs are rising. Consider this: in 2024 the CDC reported that chronic diseases such as heart disease or diabetes accounted for most deaths and disabilities in the U.S. and contributed to more than $4.5 trillion in annual healthcare costs. Currently — and unfortunately — six in 10 adults are affected by at least one chronic condition.

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A robust pipeline of new, expensive therapies and specialty medications contribute to the upward trend. We also can't forget to address the elephant in the room: increasingly popular "lifestyle" medications such as Ozempic and Wegovy, GLP-1 drugs used for weight loss. One insurer projected spending $1 billion on GLP-1 drugs in 2026 alone. Experts agree that pharmacy cost escalation is unlikely to stabilize anytime soon.

Factor #4: consolidation of health insurance and health systems slow, but continuing

By any measure the consolidation of insurance companies and the vertical integration of health systems mean limited options for brokers and their clients. In addition, the reduction of hospitals and beds in rural markets has changed access, resulting in longer wait times for non-emergency care. Primary care providers may need to migrate to virtual, on-demand models versus traditional in-person appointments. The downside is that personal relationships disappear. However, access to a physician is speedier.

Additional forces to consider

State-level regulations, including evolving leave-of-absence requirements, will continue to reshape employer policies and risk. Keep in mind, new federal policies are expected to emerge in 2026. Any proposal next year will be weighed carefully against political implications and reelection considerations.

While the current environment is choppy and unpredictable, it represents an opportunity for brokers to calm troubled waters for their clients. My recommendation is to level set with the client. Potential talking points could be: 

• Insurance premiums will continue to rise. To mitigate increased costs, we will market the program and seek competitive options, but be prepared for an increase similar to the last renewal year.
• We must evaluate and introduce new programs to manage costs. The reality is changing pharmacy expenses may result in pushback from employees. Any new medical plan adjustments will require increased employee education, providing an opportunity to reinforce health literacy.
• We will use all tools at our disposal. We have levers to pull to change costs. Virtual medicine gateways, direct contracting approaches and cash-pay models will be discussed. Unpredictability for this industry is nothing new, and we will weather storms together.  
  

Instability and unpredictability are not new to the employee benefits industry — they are defining features of it. While the next two years will undoubtedly bring challenging conversations and strategic pivots, brokers and consultants have consistently proven their ability to adapt and lead, making this one of the most rewarding, demanding and impactful industries to work in.