2024 Employee Benefits Market Outlook


2024 Employee Benefits Market Outlook 2 Table of Contents Executive Summary ................................................................................................ 3 2024 Outlook ........................................................................................................... 5 Rising Health Care Costs ..........................................................................................................................................5 Shifting Labor Market and Talent Trends .............................................................................................................7 2024 Labor Market Preview ..............................................................................................................................................7 2024 Labor and Talent Trends ...........................................................................................................................................7 Continuing Litigation and Compliance Challenges ........................................................................................... 9 Expanding State Paid Leave Mandates ...............................................................................................................11 Increasing EEOC Enforcement Activity ............................................................................................................... 13 Managing Costly Prescription Drugs and Gene and Cell Therapy ............................................................... 15 Preparing for the DOL’s New Overtime Rule .................................................................................................... 16 Improving Access to Mental Health Care ........................................................................................................... 18 Embracing Innovative Solutions for Student Loan Debt Relief ..................................................................... 19 Increased Adoption of Fertility and Family-building Benefits ......................................................................................................................................... 21 Improving Access to Preventive Care Services ................................................................................................. 23 Shifting Dynamics Leads to More In-person Work ..........................................................................................25 Conclusion .............................................................................................................. 27

2020224 Emplo4 Employyee Benefitee Benefits Marks Market Outlook 3et Outlook 3 Executive Summary In 2023, employers were forced to confront several new and enduring challenges, including rising health care costs, regulatory changes, ongoing high in昀氀a琀椀on, a compe琀椀琀椀ve labor market and growing employee demands. For many organiza琀椀ons, these challenges resulted in a di昀케cult and demanding year. While many of these di昀케cul琀椀es will likely con琀椀nue through 2024 and beyond, understanding these challenges as well as likely trends can help employers develop e昀昀ec琀椀ve and e昀케cient strategies to address them. Employers that prepare and act proac琀椀vely will likely gain a compe琀椀琀椀ve advantage in the market. Addressing the challenges presented in this Market Outlook will be the key to employers’ success in 2024 and beyond. Employers face the di昀케cult task of 昀椀nding e昀昀ec琀椀ve ways to address rising health care costs while keeping bene昀椀ts a昀昀ordable for employees. Reining in rising health care costs has been a major employee bene昀椀ts challenge for employers for many years. However, health care costs are expected to increase more in 2024 than they did in 2023. Therefore, it’s cri琀椀cal that employers 昀椀nd e昀昀ec琀椀ve solu琀椀ons to control costs while s琀椀ll delivering bene昀椀ts employees want and need. To accomplish this, employers will likely need to plan and implement mul琀椀ple strategies, including plan design altera琀椀on, cost-sharing ini琀椀a琀椀ves, evalua琀椀on of specialty drug costs and claims data u琀椀liza琀椀on. In some instances, some employers may need to take more dras琀椀c measures in 2024, such as modifying health plan designs to properly address health care cost increases. Employers have tradi琀椀onally shi昀琀ed increasing health care costs to employees to address rising costs. However, the compe琀椀琀椀ve labor market over the last few years has forced employers to keep employee coverage a昀昀ordable to a琀琀ract and retain talent. Consequently, employers have shied away from cost-sharing ini琀椀a琀椀ves to avoid disrup琀椀ng recruitment e昀昀orts. As 2023 ended, the labor market showed signs that it is so昀琀ening and, as a result, more employers may revisit cost-sharing ini琀椀a琀椀ves to rein in rising health care costs in the upcoming year. Many organiza琀椀ons have embraced o昀昀ering personalized voluntary bene昀椀ts as an integral part of their bene昀椀ts strategy, and more employers will either embrace these bene昀椀ts or expand their o昀昀erings in 2024. These bene昀椀ts are popular with employees and allow employers to tailor their bene昀椀ts to employee demands and needs. Bolstering voluntary bene昀椀ts will be an e昀昀ec琀椀ve way for employers to expand their bene昀椀ts o昀昀erings without raising costs in 2024. Addi琀椀onally, many employers will embrace a holis琀椀c approach to employee well-being to address employees’ physical and mental concerns. In 2024, in昀氀a琀椀onary pressures exacerbated many physical and mental health issues in the workplace. Employer e昀昀orts will include focusing on 昀椀nancial bene昀椀ts and educa琀椀on to help reduce in昀氀a琀椀on’s impact on workers. Moreover, family-building bene昀椀ts will become much more important for employers in the upcoming year as they try to meet employees’ bene昀椀t needs and demands. Even though the labor market is expected to so昀琀en somewhat in 2024, it is s琀椀ll expected to remain compe琀椀琀椀ve. Because of this, strategies employers have implemented to address the 琀椀ght labor market over the last few years are changing. For example, in 2024, employers plan to increase employee compensa琀椀on and adjust their recruitment strategies to focus more on skills-based hiring to

2024 Employee Benefits Market Outlook 4 昀椀nd capable workers to 昀椀ll open roles. Despite budge琀椀ng for compensa琀椀on increases in the upcoming year and the fact these increases will be high by historical standards, it’s unlikely that they’ll meet employee demands. Establishing proac琀椀ve and resilient organiza琀椀ons will be cri琀椀cal for a successful 2024. Employers should ensure that they can quickly and e昀昀ec琀椀vely respond to challenges. For example, ar琀椀昀椀cial intelligence (AI) has made its way into many workplaces, forever altering how employees work and employers operate. More employers are relying on AI for recrui琀椀ng and hiring. While this allows organiza琀椀ons to lower costs and operate more e昀케ciently, it presents certain challenges they must contend with in the upcoming year. Addi琀椀onally, for the last few years, employers have tried to force and incen琀椀vize employees to return to the o昀케ce, o昀琀en with mixed results. Overall, employers are pushing for their workers to return in 2024, but going forward, they will likely focus on approaches and work models that balance employee demands with organiza琀椀onal produc琀椀vity and e昀케ciency. Organiza琀椀ons will also need to address an琀椀cipated regulatory changes, such as a new over琀椀me rule, state-mandated leave policies and increased enforcement ac琀椀ons by federal agencies. As employers read the Market Outlook, they should consider which trends they may be suscep琀椀ble to in the upcoming year. Then, reach out to us to discuss the next steps and request valuable resources to help evaluate poten琀椀al solu琀椀ons and raise the challenges 2024 may bring. Together, we can meet the challenges and iden琀椀昀椀ed opportuni琀椀es presented in 2024.

2024 Employee Benefits Market Outlook 5 2024 Outlook This sec琀椀on explores important trends and challenges employers should monitor in 2024, discussing why they’re important and how they might impact employers. These trends will likely impact and shape the employee bene昀椀ts market throughout the upcoming year and beyond. Rising Health Care Costs Amid ongoing in昀氀a琀椀on pressures, employees and employers alike can expect their health care costs to increase in 2024. According to several industry surveys and reports, employers an琀椀cipate health care costs to grow between 6% and 8.5% in 2024, the largest increase in more than a decade. As a result, employer-sponsored health care plans may cost more than $15,000 per employee. While mi琀椀ga琀椀ng rising health care costs has historically been one of the most pressing employee bene昀椀ts challenges for employers, it’s becoming increasingly di昀케cult. As employers brace for further health care cost hikes in 2024 and beyond, they are urgently searching for solu琀椀ons to manage their growing costs and address the long-term impacts of these increases on their organiza琀椀ons. Some employers may be frustrated with the limited op琀椀ons to address their rising health care costs, especially since many may feel they’ve exhausted tradi琀椀onal approaches to mi琀椀gate health care costs; however, they can consider the following four drivers of 2024 health care costs and strategies to manage them: Mental health challenges—Employees’ mental health and pricing disclosures, and nego琀椀a琀椀ng contract terms) concerns and needs, such as depression, anxiety and and plan design changes to address costly medica琀椀ons substance use disorder, undoubtedly rose during the and treatments (e.g., prior authoriza琀椀on, step therapy COVID-19 pandemic and con琀椀nue to linger in its a昀琀er- and sites of care management). math. Employees and employers alike will con琀椀nue to Cancer treatment—Preven琀椀ve screenings were a no琀椀ce a prolonged impact of mental health challenges. cri琀椀cal health care component disrupted during the In response, employers are expected to con琀椀nue to expand access to mental health support and services, pandemic. As a result, employers are an琀椀cipa琀椀ng more late-stage cancers among workers. In response to and many plan to provide more op琀椀ons for support and rising cancer care, employees can encourage advanced reduce cost barriers to care. Organiza琀椀ons may also screening measures and maintain full coverage of rec- explore manager and employee training to recognize ommended preven琀椀on and screening services. Employ- mental health issues, an琀椀-s琀椀gma campaigns and 昀氀exi- ers can also monitor oncology clinical advancements ble working arrangements so employees can discreetly seek mental health care during regular working hours. (e.g., biomarker tes琀椀ng and immunotherapies) and help guide employees to high-quality care to improve Pharmacy costs—In 2024, pharmacy costs will con琀椀n- health outcomes. ue to impact employers signi昀椀cantly. Specialty and cost- Health care delivery—Health care innova琀椀ons, speci昀椀- ly prescrip琀椀on drugs, especially the high demand for diabetes and obesity drugs, and cell and gene therapies cally on-site or near-site clinics and virtual care, gained popularity during the pandemic, but demand is star琀椀ng (CGTs) are behind employers’ pharmacy cost increases to level out. This is likely the result of employers migrat- in 2024. The rising median prices of new pharmaceu- ing to a hybrid or remote work environment, reducing 琀椀cals as well as the high prices of drugs already on the market are driving up employers’ pharmacy costs. the need for health services at the workplace. However, such types of care con琀椀nue to be cri琀椀cal for employ- Addi琀椀onally, the U.S. Food and Drug Administra琀椀on ees as they priori琀椀ze primary or preven琀椀ve health (FDA) has been approving a greater number of high- care. Moving forward, more employers are looking to cost drugs, which is causing drug price in昀氀a琀椀on. To address rising drug costs, employers can implement expand health care o昀昀erings to be琀琀er support primary care and mental health and priori琀椀ze employee health pharmacy management strategies, including priori琀椀zing outcomes. transparent PBM prac琀椀ces (e.g., reques琀椀ng detailed reports, audi琀椀ng PBM services, requiring compensa琀椀on

2024 Employee Benefits Market Outlook 6 Heightened health care costs are likely to con琀椀nue impac琀椀ng employers for the foreseeable future. Looking ahead to 2024, many employers are focusing on impacts related to mental health, medica琀椀ons, cancer and health care delivery. To combat rising costs, employers are focusing on improving employee health outcomes, reducing unnecessary services and priori琀椀zing preven琀椀on and primary care. Many employers have avoided shi昀琀ing increasing health care costs onto employees due to the 琀椀ght labor market and ongoing a琀琀rac琀椀on and reten琀椀on challenges. Despite employers’ reluctance to shi昀琀 the burden of rising costs onto employees, more employers will likely increase cost-sharing amounts somewhat in 2024. However, it’s unlikely that these employers will shi昀琀 enough costs through cost-sharing ini琀椀a琀椀ves to lower their projected cost increases. Consequently, with many organiza琀椀ons avoiding cost- shi昀琀ing altogether and others being hesitant to shi昀琀 a large por琀椀on of costs onto employees in the new year, employers will have to get crea琀椀ve with plan design. For example, many employers are looking to enhance bene昀椀ts by seeking opportuni琀椀es to add value. That could mean 昀椀lling gaps in current o昀昀erings to make them more inclusive. Behavioral health care remains a strong focus for many employers, so an example of a bene昀椀t enhancement would be expanding employee assistance program services and adding virtual behavioral health care op琀椀ons. In 2024, employers will focus on bene昀椀ts educa琀椀on and employee communica琀椀on, with the goal of helping them thoroughly understand their bene昀椀ts. Many employees are looking for ways to stretch their hard- earned dollars further, and employers can step in to provide that much-needed guidance. In turn, employer e昀昀orts focused on preven琀椀ve and proac琀椀ve health care can help curb health care costs.

2024 Employee Benefits Market Outlook 7 Shifting Labor Market and Talent Trends A琀琀rac琀椀on and reten琀椀on challenges remained persistent in 2023 as organiza琀椀ons across industries struggled to 昀椀nd and keep workers. Zywave’s 2023 A琀琀rac琀椀on and Reten琀椀on Employer Pulse Survey found that over 60% of respondents listed a琀琀rac琀椀on and reten琀椀on as a top-昀椀ve business challenge, but this was notably down from 80% in 2022. Looking ahead to 2024, labor markets are expected to remain compe琀椀琀椀ve yet ease up compared to what employers have experienced since the beginning of the COVID-19 pandemic. Compe琀椀琀椀on to win over talent against compe琀椀tors remains year over year, but how employers react and win over workers con琀椀nues to change. This year, employers should understand how the market is shi昀琀ing while focusing on new talent strategies. 2024 Labor Market Preview Since the onset of the pandemic, the talent market has been a day-to-day challenge for most organiza琀椀ons. According to the U.S. Bureau of Labor Sta琀椀s琀椀cs (BLS), the total number of employee quits and job openings have reached record highs in the past two years. The BLS’ October 2023 Job Openings and Labor Turnover Summary reported 8.7 million open jobs and 3.6 million employee quits. These numbers have trended down from all-琀椀me highs of employee quits (November 2021) and job openings (March 2022) but remain higher than pre-pandemic levels, highligh琀椀ng the market’s con琀椀nued compe琀椀琀椀ve nature. These numbers showcase that while the labor market may be easing, it remains compe琀椀琀椀ve for employers. For example, Zywave’s survey found that the majority of employers (66%) expect a琀琀rac琀椀on and reten琀椀on challenges to “stay about the same” in 2024, while 15% expect them to improve. Speci昀椀cally, organiza琀椀ons reported more di昀케culty with a琀琀rac琀椀ng new workers than retaining exis琀椀ng ones, as more workers have decided to stay put rather than test the labor market. In summary, employers can expect the labor market to moderate—but should not expect talent challenges to go away. While the labor market isn’t likely to be the signi昀椀cant challenge of previous years, employers will need to stay agile and adap琀椀ve. 2024 Labor and Talent Trends While labor challenges are trending down, they remain an opera琀椀onal challenge for employers—especially when it comes to a琀琀rac琀椀ng new employees. Changes to the economy, technology and worker desires are unavoidable. As such, employers will be tasked with naviga琀椀ng these factors as they change year over year. These labor and talent trends are likely to shape the employment market in 2024: Increased compensa琀椀on—According to industry data, employers are budge琀椀ng for an average salary increase of 4% in 2024, down from 4.4% in 2023. While these numbers are high by historical standards, they don’t match the raises workers want. Zywave’s research found that employers listed “matching worker demands for compensa琀椀on” as their top current a琀琀rac琀椀on and reten琀椀on challenge, with 48% lis琀椀ng it in their top three. Survey results further revealed that half of employers plan on raising employee compensa琀椀on to win over new workers, while even more (53%) are planning on improving compensa琀椀on to be琀琀er retain employees. These 昀椀ndings, paired with in昀氀a琀椀on and market research, show that organiza琀椀ons will try to win over talent by o昀昀ering more money in 2024. Employers will need to make tough decisions about how to increase employee compensa琀椀on or face the prospect of losing workers to compe琀椀tors who are o昀昀ering more. Skills-based hiring—Employers are struggling to 昀椀nd employees with the right skills and develop them for roles that are increasingly complex. According to Zywave’s 2023 Employer A琀琀rac琀椀on and Reten琀椀on Pulse Survey, “昀椀nding the right skill sets” was the number two talent challenge for employers, right behind compensa琀椀on. The skills needed to perform a job at a high level change every year, leaving employers with the op琀椀on of trying to acquire those skill sets by hiring or upskilling current employees. Skills-based hiring allows employers to hire for speci昀椀c skills rather than focus on candidates’ educa琀椀on or cer琀椀昀椀ca琀椀ons. While some posi琀椀ons have a legi琀椀mate business case for more requirements, employers are 昀椀nding that focusing on skills-based selec琀椀on processes can grow their talent pool and help 昀椀nd the right candidate for a job. AI in recrui琀椀ng—Many employers already use AI in recrui琀椀ng. This presents certain opportuni琀椀es and challenges. Employers that aren’t e昀昀ec琀椀vely leveraging technology—including AI—are a step behind in terms of reaching a wider talent pool while crea琀椀ng opera琀椀onal e昀케ciencies. However, AI also poses risks, such as biased or discriminatory employment selec琀椀on and errors. In 2024, AI is likely to impact more aspects of the workplace, including HR func琀椀ons. Employers will want to explore e昀케ciencies but remain cau琀椀ous about how they use these tools.

2024 Employee Benefits Market Outlook 8 The Great Gloom—Employers will face signi昀椀cant employee engagement challenges in 2024, referred to as the “Great Gloom.” Employees aren’t likely to resign as fast in 2024 as in previous years, but many are increasingly unhappy with their jobs. Employee happiness has decreased for three years through June 2023, and this trend is likely to con琀椀nue in 2024. This dissa琀椀sfac琀椀on can be due to general stress, worsening mental health, return-to-o昀케ce mandates, low wages and a lack of career advancement opportuni琀椀es. The reasons employees are dissa琀椀s昀椀ed can vary by industry; however, savvy employers across industries will priori琀椀ze improving employee engagement in 2024 and avoiding the nega琀椀ve impacts of this trend. Genera琀椀on (Gen) Z’s growing workforce presence—A report from employment website Glassdoor predicts that in 2024, Z Gen Z will surpass the “baby boomer” genera琀椀on (those born between 1946 and 1964) in workforce par琀椀cipa琀椀on. Gen Z is de昀椀ned by the U.S. Census as individuals born between 1997 and 2013. This group is rapidly changing the workplace— making employers rethink how they a琀琀ract and retain workers. For example, this genera琀椀on priori琀椀zes culture, wants learning and development opportuni琀椀es, and desires 昀氀exibility. They also want a say in reshaping how the workplace works and hope to be able to contribute and problem-solve—even in entry-level roles. To win over this genera琀椀on, employers will need to rethink how they recruit workers. Expanding an online presence, using social media, and using university and college recrui琀椀ng strategies are good channels to reach younger workers. Crea琀椀ng a collabora琀椀ve culture with career advancement will help keep them. Voluntary bene昀椀ts—For employers unable to raise employee pay as high as they would like, voluntary bene昀椀ts can o昀昀er more perks to employees without raising health care costs. Voluntary bene昀椀ts supplement tradi琀椀onal bene昀椀ts (e.g., health insurance) and are usually employee-paid. These perks have become more popular in recent years, with even more employers planning to expand their o昀昀erings in 2024. Employers can explore o昀昀ering core voluntary bene昀椀ts (e.g., dental, vision and life insurance; short- and long-term disability) if they don’t already or consider expanding to more op琀椀ons, such as hospital indemnity insurance, pet insurance and gym memberships. Surveying employees can o昀昀er a way to learn more about which voluntary bene昀椀ts meet the desires of a speci昀椀c workforce. These factors are likely to in昀氀uence the talent market in 2024. Employers will need to adapt by taking inventory of how these trends are likely to impact their workplace and priori琀椀zing strategies to help them navigate the ever-changing labor market. Employers have been hearing that the labor market “may ease” for a few years now, but many are s琀椀ll dealing with a琀琀rac琀椀on and reten琀椀on challenges. The reality is that the labor market remains compe琀椀琀椀ve for employers, and current trends are changing what employers must do to win over employees. In 2024, employers can expect trends such as con琀椀nued demands for compensa琀椀on, return-to-o昀케ce mandates, the need for workers with the right skills and AI to be some of the biggest obstacles. Successful employers will con琀椀nue to monitor these trends, informing their talent strategies in an evolving labor market.

2024 Employee Benefits Market Outlook 9 Continuing Litigation and Compliance Challenges New regula琀椀ons combined with con琀椀nued workforce demands mean employers will likely see an increase in employment-related lawsuits and ac琀椀on from federal, state and local agencies in 2024. According to research from the BTI Consul琀椀ng Group, employment li琀椀ga琀椀on is expected to increase by 6.8% in 2024. Class ac琀椀ons and cybersecurity li琀椀ga琀椀on are also expected to increase signi昀椀cantly in 2024 (7.5% and 9.9%, respec琀椀vely). These types of lawsuits are becoming costly and more complex each year, and as a result, employers are likely to experience increased compliance burdens and costs in 2024. In 2023, the U.S. Supreme Court issued several consequen琀椀al decisions that altered established labor and employment laws and workplace prac琀椀ces. These decisions addressed religious accommoda琀椀ons, union strike misconduct, over琀椀me pay and a昀케rma琀椀ve ac琀椀on. The Supreme Court will hear several cases during its current term, which started on Oct. 2, 2023, that will similarly impact employers going forward. For example, in Loper Bright Enterprises v. Raimondo, the Court will consider whether to overturn a long- standing precedent that allows federal agencies the wide authority to interpret federal laws and enact regula琀椀ons. If the Supreme Court overturns this doctrine, it could have a signi昀椀cant impact on employers since it would limit federal agencies’ ability to address issues such as labor condi琀椀ons and public health. In Acheson Hotels v. Laufer, the Court will decide whether a “tester” plain琀椀昀昀—an individual who goes from business to business looking for a reason to ini琀椀ate a lawsuit—has standing to sue an employer for alleged viola琀椀ons under the Americans with Disabili琀椀es Act (ADA) when the tester had no inten琀椀on of patronizing the business. This case is noteworthy because the ADA doesn’t require claimants to no琀椀fy an organiza琀椀on of alleged viola琀椀ons or provide them with an opportunity to address and remedy the viola琀椀ons before 昀椀ling a lawsuit. As a result, businesses can be caught o昀昀 guard and face costly discrimina琀椀on lawsuits. Further, in Muldrow v. St. Louis, the Supreme Court will decide whether Title VII of the Civil Rights Act (Title VII) prohibits discrimina琀椀on in lateral transfer decisions when the transfer did not result in a signi昀椀cant disadvantage to the employee. In this case, an employee was forced to accept a lateral transfer that provided the same pay and bene昀椀ts. The employee claimed that the transfer was based on illegal gender bias. Several federal courts have held that a forced lateral transfer is an adverse employment ac琀椀on under Title VII, even if an employee fails to show that the move caused any addi琀椀onal injury. This case is expected to provide employers with clarity on what is considered an adverse employment ac琀椀on under Title VII. In addi琀椀on to these Supreme Court cases, many developments may impact employer health care and employee bene昀椀ts-related obliga琀椀ons in 2024. For example, in March 2023, the U.S. District Court for the Northern District of Texas struck down a key component of the A昀昀ordable Care Act’s (ACA) preven琀椀ve care mandate as uncons琀椀tu琀椀onal. The ACA requires health insurance plans to cover certain preven琀椀ve services without cost sharing. When Congress dra昀琀ed the law, it failed to specify the covered services and instead delegated the task to the U.S. Preven琀椀ve Services Task Force, Advisory Commi琀琀ee on Immuniza琀椀on Prac琀椀ces, and the Health

2024 Employee Benefits Market Outlook 10 Resources and Services Administra琀椀on. These government bodies are allowed to add new services without Congress having to pass new legisla琀椀on. The Biden administra琀椀on is currently appealing the District Court’s decision. However, non-grandfathered health plans and issuers must con琀椀nue to cover, without cost sharing, the full range of preven琀椀ve care services required by the ACA. Employers should con琀椀nue to monitor this case in 2024 because it could impact their health coverage. Addi琀椀onally, federal agencies have indicated they may expand the ACA’s preven琀椀ve care mandate to include over-the-counter (OTC) preven琀椀ve products in 2024. Notably, in July 2023, the FDA approved the 昀椀rst nonprescrip琀椀on daily oral contracep琀椀ve (Opill), which is expected to become available in stores and online in early 2024. Current guidance requires coverage for OTC preven琀椀ve products without cost sharing only when they are prescribed by a health care provider. In 2024, employers should watch for any changes regarding coverage of OTC preven琀椀ve products and make any necessary adjustments to their health plan coverage. Finally, the Biden administra琀椀on has indicated its inten琀椀on to expand access to contracep琀椀ves by narrowing the exemp琀椀ons to the ACA’s contracep琀椀ve coverage mandate. Under the ACA, churches and houses of worship are not required to cover contracep琀椀ves. Also, current guidance exempts certain employers from covering contracep琀椀ves if they object to this coverage based on sincerely held religious beliefs or moral convic琀椀ons. In January 2023, federal agencies released a proposed rule that would rescind the moral exemp琀椀on to covering contracep琀椀ves but retain the religious exemp琀椀on. Employers who rely on the moral exemp琀椀on to cover contracep琀椀ves should monitor the release of a 昀椀nal rule in 2024 and adjust their health coverage going forward, if necessary. Moreover, the IRS, the U.S. Department of Health and Human Services (HHS), and the Employee Bene昀椀ts Security Administra琀椀on issued a proposed rule in August 2023 that, if 昀椀nalized, would make extensive changes to the Mental Health Parity and Addic琀椀on Equity Act’s (MHPAEA) requirements. The proposed rule would require health plans and issuers to collect, evaluate and consider relevant data on access to mental health and substance use disorder coverage related to access to medical and/or surgical coverage instead of relying on descrip琀椀ons of coverage. The proposed rule would also impose a special rule for nonquan琀椀ta琀椀ve treatment limita琀椀ons related to network composi琀椀on and establish addi琀椀onal standards for compara琀椀ve analysis. Accordingly, employers should carefully monitor MHPAEA compliance to protect themselves from U.S. Department of Labor (DOL) enforcement ac琀椀on and lawsuits. In 2023, health plan coverage of fer琀椀lity care became the subject of li琀椀ga琀椀on due to the de昀椀ni琀椀on of infer琀椀lity. The Centers for Disease Control and Preven琀椀on generally de昀椀nes infer琀椀lity as not being able to conceive a昀琀er one year (or longer) of unprotected sex. While this de昀椀ni琀椀on has been adopted by many insurers, it has been challenged in court as discriminatory against same-sex couples who can only conceive through fer琀椀lity treatment. For example, health plan par琀椀cipants 昀椀led a class ac琀椀on lawsuit in the U.S. District Court case of Murphy v. Health Care Serv. Corp., alleging that their policy’s terms were discriminatory against certain par琀椀cipants based on their sexual orienta琀椀on, viola琀椀ng ACA Sec琀椀on 1557, which prohibits discrimina琀椀on in covered health programs and ac琀椀vi琀椀es based on sex, race, color, na琀椀onal origin, age or disability. The court concluded that the policy was wri琀琀en in a way that a signi昀椀cant por琀椀on of the LGBTQI+ community could not meet the de昀椀ni琀椀on of infer琀椀lity without incurring out-of-pocket costs compared to their straight counterparts. As a result, the court held that the plain琀椀昀昀s adequately alleged that the policy discriminated against certain par琀椀cipants based only on their sexual orienta琀椀on. Adding another layer of complexity to these cases is the uncertainty surrounding Sec琀椀on 1557’s prohibi琀椀on on sex discrimina琀椀on. This de昀椀ni琀椀on is currently being challenged in the court system, with a divide over whether sex discrimina琀椀on includes discrimina琀椀on based on sexual orienta琀椀on and gender iden琀椀ty. Li琀椀ga琀椀on surrounding Sec琀椀on 1557’s de昀椀ni琀椀on of sex-based discrimina琀椀on will be another area for employers to watch in 2024. Supreme Court decisions, new rulings and other li琀椀ga琀椀on will likely con琀椀nue to impact employers in the upcoming year. Many of these decisions and rulings will have a las琀椀ng impact on employers’ prac琀椀ces, adding to or crea琀椀ng new administra琀椀ve and compliance burdens in 2024 and beyond. By staying informed about these decisions and rulings, employers can be prepared for any changes and be琀琀er ensure compliance, avoiding costly li琀椀ga琀椀on and administra琀椀ve enforcement ac琀椀ons.

2024 Employee Benefits Market Outlook 11 Expanding State Paid Leave Mandates 2023 brought many shi昀琀ing compliance obliga琀椀ons for employers, including new federal and state laws and regula琀椀ons expanding worker protec琀椀ons. The widespread adop琀椀on of remote and 昀氀exible work arrangements over the last few years has led to an increasing number of states and locali琀椀es passing paid sick leave, paid leave for any reason, and paid family and medical leave. While paid leave gained a stronger foothold in 2023, there’s no reason to expect this trend to slow down, as more states and local governments are likely to enact similar legisla琀椀on in 2024. This means more organiza琀椀ons will be subject to paid leave requirements in the upcoming year, increasing employers’ compliance and administra琀椀ve burdens. At the start of 2023, 14 states—Arizona, California, Colorado, Connec琀椀cut, Maryland, Massachuse琀琀s, Michigan, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington—already had paid sick leave mandates in place. On the other hand, Maine and Nevada require employers to provide paid leave for any reason. During the year, Minnesota and Illinois both passed paid leave laws, which take e昀昀ect Jan. 1, 2024. Some states amended their exis琀椀ng paid sick leave laws in 2023 to bene昀椀t employees. For example, California expanded the amount of paid sick leave employers must provide workers from three days per year to 昀椀ve, e昀昀ec琀椀ve Jan. 1, 2024. Connec琀椀cut added mental health wellness days as covered 琀椀me under its paid sick leave law, and it extended paid sick leave to the parents of vic琀椀ms of family violence and sexual assault. Meanwhile, Colorado amended its paid sick leave law to cover bereavement, caring for a family member whose school or place of care was closed, and for home evacua琀椀ons. 11 states—California, Colorado, Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Washington—had already passed paid family and medical leave programs at the start of 2023. Throughout the year, Maine and Minnesota enacted new paid family and medical leave laws, bringing the number of states with these programs to 13. Even in states that enacted paid family and medical leave laws before 2023, there was plenty of ac琀椀vity surrounding such legisla琀椀on during the year. For instance, in Colorado and Oregon, employer and employee contribu琀椀ons to fund paid family and medical leave began in January. As a result, Oregon issued regula琀椀ons and began o昀昀ering these bene昀椀ts in September. Colorado and Delaware also implemented such regula琀椀ons, Maryland delayed and amended its program, and Massachuse琀琀s changed its law to permit workers to “top o昀昀” their paid family and medical leave compensa琀椀on with pay from employer-provided paid leave. 2023 also saw novel developments in paid family and medical leave. In par琀椀cular, Washington passed legisla琀椀on that will require transporta琀椀on network companies to pay drivers’ paid family and medical leave premiums. Addi琀椀onally, as they do toward the end of every year, states began announcing their updated paid family and medical leave contribu琀椀on and bene昀椀ts rates for 2024. Looking forward to 2024 and beyond, Jan. 1 marks the date paid family and medical leave bene昀椀ts become available in Colorado. This is also the deadline for small employers in Delaware to elect to reduce employees’ parental leave by 50% (for the 昀椀rst 昀椀ve years of the program) and for employers to apply for 昀椀ve-year grandfathering of exis琀椀ng plans. The state’s paid family and medical leave bene昀椀ts will start on Jan. 1, 2026. Maryland delayed the start of its program so that contribu琀椀ons will begin Oct. 1, 2024, with bene昀椀ts star琀椀ng Jan. 1, 2026. Family, private and nonstate public employers will be able to buy coverage for Vermont’s voluntary program star琀椀ng July 1, 2024. Insurance becomes available for purchase by individual workers and employers with only one employee in 2025. In 2024, employers not subject to state or local paid sick leave requirements should be a琀琀uned to legisla琀椀ve momentum on this topic in loca琀椀ons where they operate, as it’s likely that more areas will pass paid leave mandates. Employers already subject to paid sick leave laws should stay alert to amendments that would expand such leave, especially for reasons related to reproduc琀椀ve loss, bereavement, organ dona琀椀on and public health emergencies, all areas in which states have increasingly granted leave en琀椀tlements in recent years.

2024 Employee Benefits Market Outlook 12 While paid leave laws will likely become more widespread as addi琀椀onal states and local governments pass related legisla琀椀on, employers can consider embracing this trend even if they’re not legally required to do so. Although paid leave may seem like another expensive bene昀椀t for employers to o昀昀er, it presents an opportunity to cul琀椀vate employee loyalty, boost engagement and improve produc琀椀vity. Establishing loyalty among workers is vital for employers struggling to navigate the compe琀椀琀椀ve labor market. O昀昀ering a琀琀rac琀椀ve bene昀椀ts, such as paid leave, can make organiza琀椀ons more en琀椀cing to applicants and strengthen reten琀椀on among exis琀椀ng workers. Flexible bene昀椀ts, including paid sick and medical leave, are extremely popular with employees, especially among younger workers. Therefore, providing paid leave bene昀椀ts can help organiza琀椀ons remain compe琀椀琀椀ve when recrui琀椀ng key talent in 2024. Furthermore, paid leave can be an important component of providing a safe and healthy workplace for employees. With this in mind, while o昀昀ering paid leave is an expense, it’s also an investment, which can be good for workers’ produc琀椀vity and morale and an organiza琀椀on’s bo琀琀om line.

2024 Employee Benefits Market Outlook 13 Increasing EEOC Enforcement Activity The U.S. Equal Employment Opportunity Commission (EEOC) is a federal agency responsible for enforcing federal employment discrimina琀椀on laws. The agency’s goal is to advance workplace opportunity by enforcing these laws. The EEOC experienced several noteworthy changes in 2023, including new leadership, structural changes and an increased budget. It also mul琀椀plied its enforcement e昀昀orts; at the end of 昀椀scal year (FY) 2023, the agency reported a 52% increase in lawsuit 昀椀lings from the previous year. These e昀昀orts are likely to con琀椀nue in 2024. As a result, employers must prepare now for increased EEOC ac琀椀vity by be琀琀er understanding their legal obliga琀椀ons related to discrimina琀椀on laws and proac琀椀vely preven琀椀ng workplace discrimina琀椀on. In 2023, the U.S. Senate con昀椀rmed Kalpana Kotagal as the newest EEOC commissioner, giving the Democrats the majority on the agency’s 昀椀ve-member panel. This will likely allow current EEOC Chair Charlo琀琀e Burrows to move more quickly when enac琀椀ng agency policies and deciding EEOC enforcement priori琀椀es. In addi琀椀on, there was a 昀氀urry of EEOC ac琀椀vity in 2023. The commission issued new guidance and technical assistance on several topics, including: • Hearing impairments and condi琀椀ons and the ADA • Visual disabili琀椀es and the ADA • Workplace equality for LGBTQI+ employees • Automated systems use, including AI, in employment decisions • Harassment in the workplace In September 2023, the EEOC released its Strategic Enforcement Plan (SEP) for FYs 2024-28, which emphasizes a greater focus on discrimina琀椀on against vulnerable popula琀椀ons. This document establishes the agency’s enforcement priori琀椀es as it works to prevent and remedy discrimina琀椀on in the workplace. According to the SEP, the EEOC is priori琀椀zing the following subject ma琀琀ers over the next 昀椀ve years: • Elimina琀椀ng barriers in recruitment and hiring • Protec琀椀ng vulnerable workers and persons in underserved communi琀椀es from employment discrimina琀椀on • Addressing selected emerging and developing issues • Advancing equal pay for all workers • Preserving access to the legal system • Preven琀椀ng and remedying systemic discrimina琀椀on The 2024 SEP also incorporates and expands on priori琀椀es outlined in the EEOC’s previous SEPs. Speci昀椀cally, the 2024 SEP: • Includes new categories of workers (such as “LGBTQI+ individuals”) for targeted educa琀椀on and outreach • Recognizes employers’ increasing use of technology, such as AI or machine learning • Addresses other recent developments, such as COVID-19-related discrimina琀椀on, new pregnancy-related protec琀椀ons, new technology-based employment prac琀椀ces, and certain high-pro昀椀le incidents of bias and violence based on protected traits • Iden琀椀昀椀es certain contracts, such as nondisclosure or nondisparagement agreements, that will receive increased scru琀椀ny to help preserve access to the legal system The agency also published its Strategic Plan (SP) for FYs 2022-26, providing the framework for achieving the EEOC’s mission. The SEP works together with the SP by establishing substan琀椀ve enforcement priori琀椀es. Addi琀椀onally, the EEOC started accep琀椀ng charges of discrimina琀椀on under the new Pregnant Workers Fairness Act (PWFA), which went into e昀昀ect on June 27, 2023, and requires covered employers to provide reasonable accommoda琀椀ons to a quali昀椀ed individual’s known limita琀椀ons related to pregnancy, childbirth or related medical condi琀椀ons. The PWFA builds upon exis琀椀ng protec琀椀ons against pregnancy discrimina琀椀on under Title VII and access to reasonable accommoda琀椀ons under the ADA. To further its enforcement e昀昀orts of the new law, the EEOC proposed a rule to implement the PWFA and new educa琀椀onal resources for workers.

2024 Employee Benefits Market Outlook 14 The agency also announced a formal partnership with the DOL’s Wage and Hour Division in September to enhance and maximize the enforcement of federal laws and regula琀椀ons through improved coordina琀椀on and communica琀椀on. Notably, the EEOC se琀琀led its 昀椀rst lawsuit alleging discrimina琀椀on arising from an employer’s use of AI in recrui琀椀ng and hiring in 2023. In 2023, the commission’s li琀椀ga琀椀on ac琀椀vity reached a level that hasn’t been seen in recent years—a signal that the EEOC is returning to prior levels of li琀椀ga琀椀on ac琀椀vity. At the end of 2023, the EEOC signi昀椀cantly increased the number of lawsuits it 昀椀led, including 67 in September. This helped boost the total number of lawsuits the agency 昀椀led in 2023 to 143, represen琀椀ng a 52% increase from 2022. The number of lawsuits the EEOC 昀椀led in FY 2023 was the most it had 昀椀led in 昀椀ve years. Considering that the EEOC only 昀椀led three cases during the 昀椀rst four months of FY 2023, it provides employers with a likely preview of what to expect in 2024. Employers can expect the EEOC to be even more ac琀椀ve in 2024 than last year since the agency received a 6% (or $26 million) budget increase for FY 2024, providing the EEOC with more resources for inves琀椀ga琀椀ons, enforcement ac琀椀ons and lawsuits. Prudent employers need to take heed of these developments in 2024, especially a昀琀er the EEOC issued a rare press release at the end of FY 2023 highligh琀椀ng its increased li琀椀ga琀椀on ac琀椀vity. EEOC Chair Burrows stated, “The EEOC’s li琀椀ga琀椀on program is an important tool to ensure compliance with the na琀椀on’s an琀椀-discrimina琀椀on laws and promote equal employment opportuni琀椀es when the commission is unable to obtain voluntary compliance.” Much of the agency’s li琀椀ga琀椀on e昀昀orts in FY 2023 were focused on the subject ma琀琀er addressed in its recently published guidance. With this increased ac琀椀vity, it’s vital that employers priori琀椀ze compliance with federal employment laws. Organiza琀椀ons can minimize their exposure to EEOC’s increasing enforcement ac琀椀ons by remaining compliant with federal laws, training managers and employees, reviewing workplace policies and handbooks, and staying informed about the agency’s strategies. Employers should consider focusing on prac琀椀ces that may expose them to liability, such as systemic lawsuits, and subjects on which the agency has recently published guidance.

2024 Employee Benefits Market Outlook 15 Managing Costly Prescription Drugs and Gene and Cell Therapy Employers’ health plans have increasingly been pressured by rising prices of new specialty drugs and exis琀椀ng ones—and pharmacy costs are not expected to slow down in 2024. Two speci昀椀c specialty drug trends are propelling the increase of specialty drug spending: Weight loss drugs and new CGTs are receiving accelerated approvals. Undoubtedly, employers will con琀椀nue to struggle with controlling rising health care costs and providing employees with a昀昀ordable and quality care op琀椀ons. Also, as more employees demand these types of drugs and treatments, employers may consider ways to include them in their bene昀椀ts o昀昀erings to a琀琀ract and retain more talent. Ul琀椀mately, understanding weight loss drugs and CGT and their poten琀椀al impacts on health care costs allows employers to be琀琀er prepare and implement e昀昀ec琀椀ve cost-mi琀椀ga琀椀ng strategies. Part of the reason for higher costs associated with weight loss drugs is due to increased use. GLP-1 drugs, which suppress hunger and make a person feel full longer, were originally designed to treat diabetes but are now also being used o昀昀-label for weight loss treatment. GLP-1 drugs are typically priced at around $1,000 per pa琀椀ent per month. Despite the rising popularity of GLP-1 drugs for weight loss, employers remain divided on coverage, especially because of their o昀昀-label use. O昀昀-label use isn’t likely covered by health insurance, which could force workers to pay for out-of-pocket treatment. Also, many employers are concerned that these high-cost weight loss drugs will further contribute to rising prescrip琀椀on drug costs. More employers are exploring weight loss drugs as this op琀椀on for weight loss becomes more popular among workers. This pressure will likely further increase in 2024 as some GLP-1 drugs are being approved for weight loss treatment by the FDA. However, covering these drugs may increase the cost of health insurance for all employees at a 琀椀me when prescrip琀椀on drug prices are already soaring, leaving employers with much to consider. Next, the recent rise of CGT may create even more concern for employers as it relates to pharmacy costs. These treatments typically range from $250,000 to $3.5 million per individual. One of the main reasons CGT is extremely costly is that developing and manufacturing the treatment takes a signi昀椀cant amount of 琀椀me and resources. Developing CGTs can cost more than $5 billion, more than 昀椀ve 琀椀mes the average cost of developing tradi琀椀onal drugs. Addi琀椀onally, these treatments are manufactured using manual processes and are typically produced in small quan琀椀琀椀es. This limits the produc琀椀on capability of these therapies. As a result, the current demand for CGT is outpacing manufacturing capacity. By 2025, it’s es琀椀mated that nearly 100,000 pa琀椀ents in the United States will be eligible for CGT, which could cost $25 billion. The increased demand in CGT forces therapy developers to outsource treatment produc琀椀on and manufacturing, which is o昀琀en very complex, resul琀椀ng in increased produc琀椀on 琀椀me and costs. As organiza琀椀ons face skyrocke琀椀ng prescrip琀椀on drug costs, more employers are considering the following strategies for managing specialty drug and treatment costs: Managed access—Some employers have started to use independent third par琀椀es when prior authoriza琀椀on is required for expensive specialty drugs and treatment. This helps employers mi琀椀gate against pharmacy bene昀椀t managers’ use of rebates and prior authoriza琀椀on, which can result in increased approval for CGT, crea琀椀ng more savings for employers. Other control ini琀椀a琀椀ves may include case management, disease management and nurse advice lines. Exclusions—Some employers have limited or outright excluded plan coverage of certain specialty drugs. However, limi琀椀ng or excluding specialty drugs like CGT from health plan coverage may result in compliance risks. Cost sharing—Some employers may implement higher cost sharing, including deduc琀椀bles, copays, coinsurance and premium contribu琀椀ons, for high-cost or low-value specialty medica琀椀ons. Keep in mind that CGT operates very di昀昀erently from tradi琀椀onal treatments. These treatments are generally administered once or twice over a pa琀椀ent’s life琀椀me. With tradi琀椀onal treatments, a drug is administered and paid for over 琀椀me as the prescrip琀椀on is 昀椀lled, and pa琀椀ents receive the health bene昀椀ts incrementally. With CGT, payment occurs upfront, and the pa琀椀ent experiences health bene昀椀ts over 琀椀me. As a result, employers can explore nontradi琀椀onal payment models o昀昀ered by insurance and pharmaceu琀椀cal companies to help o昀昀set CGT treatment costs. For most employer-sponsored health plans, the cost of specialty drugs is their fastest-growing expense. As these treatments become more widely available, employers will likely be forced to address even higher specialty drug costs.

2024 Employee Benefits Market Outlook 16 Preparing for the DOL’s New Overtime Rule On Aug. 30, 2023, the DOL announced a proposed rule to amend current requirements that execu琀椀ve, administra琀椀ve and professional employees (EAPs) must sa琀椀sfy to be exempt from the Fair Labor Standards Act’s (FLSA) minimum wage and over琀椀me requirements. The proposed rule to amend the FLSA white-collar exemp琀椀ons was published in the Federal Register on Sept. 8, 2023. The DOL established the rule’s 60-day comment period, which closed on Nov. 7, 2023. This proposed over琀椀me rule is expected to become 昀椀nal during the 昀椀rst part of 2024. If it is 昀椀nalized and implemented, the over琀椀me protec琀椀ons will extend to approximately 3.6 million more workers in the country and increase the salary threshold by nearly 55%. However, many experts expect the 昀椀nal rule to be challenged legally by states and business groups before it is implemented. Under the FLSA, covered employers must pay employees at least the federal minimum wage for all hours worked and over琀椀me pay—at a rate of 1.5 琀椀mes their regular pay rate—for all hours worked over 40 in a workweek. However, the FLSA provides several exemp琀椀ons from minimum wage and over琀椀me pay requirements. The most common are “white-collar” exemp琀椀ons. These exemp琀椀ons mainly apply to EAPs but include outside sales personnel and certain computer and highly compensated employees (HCEs). To qualify for a white-collar exemp琀椀on, an employee must sa琀椀sfy the following tests: • The salary basis test ensures the employee is paid a predetermined and 昀椀xed salary that is not subject to reduc琀椀on due to varia琀椀ons in the quality or quan琀椀ty of work. • The salary level test con昀椀rms that the employee meets a minimum speci昀椀ed amount to qualify for the exemp琀椀on. The current salary threshold is $684 per week ($35,568 per year) for EAPs and $107,432 per year for HCEs. • The du琀椀es test requires that the employee’s job du琀椀es conform to EAP du琀椀es. To sa琀椀sfy the du琀椀es test, an employee’s actual work responsibili琀椀es must match the descrip琀椀on the FLSA assigns to the exemp琀椀on. The proposed over琀椀me rule doesn’t impact the du琀椀es test for the white-collar FLSA exemp琀椀ons. The DOL is proposing to increase the standard salary level from $684 to $1,059 per week ($35,568 to $55,068 per year) for EAPs and from $107,432 to $143,988 per year for HCEs. The rule would also enable the DOL to update salary levels automa琀椀cally every three years without having to rely on the rulemaking process. With this substan琀椀al increase, more workers will likely qualify for over琀椀me pay. If the 昀椀nal over琀椀me rule is implemented as proposed, employers would have to either increase exempt employees’ pay to put them above the threshold or shi昀琀 impacted employees to hourly pay and create processes to track their hours. The DOL expects the proposed rule to transfer $1.2 billion in wages from employers to employees from new over琀椀me premiums and projected pay raises. According to the agency’s es琀椀mates, the new over琀椀me rule will result in small en琀椀琀椀es having an average total cost of $4,323 and average payroll increases of $2,638 per a昀昀ected en琀椀ty in the 昀椀rst year. The Economic Policy Ins琀椀tute es琀椀mates that the rule would nearly double the percentage of full-琀椀me salaried workers who are en琀椀tled to over琀椀me from 15% to 30%, resul琀椀ng in 300,000 manufacturing workers, 300,000 retail workers, 180,000 hospitality workers and 600,000 health and social service workers becoming eligible for over琀椀me. The DOL received more than 33,000 comments regarding the proposed rule, which the agency must review before it can start preparing its 昀椀nal rule. Many business groups oppose the proposed rule change, arguing that it would increase employer payroll costs, harm small businesses and violate the Administra琀椀ve Procedure Act. Some argue that the new rule will result in employers being forced to cut expenses, reduce headcount and, in some cases, permanently close. In 2016, when former President Barack Obama tried to increase the salary threshold for exempt employees to $913 per week, it resulted in lawsuits from 21 states and business groups as well as a federal court injunc琀椀on. Consequently, the new rule’s signi昀椀cant changes to the salary threshold will likely result in similar legal challenges, which could delay the implementa琀椀on of the DOL’s new over琀椀me rule. While the agency’s new over琀椀me rule doesn’t impose any new requirements on employers at this 琀椀me, it could signi昀椀cantly a昀昀ect organiza琀椀ons’ opera琀椀onal and compliance costs and increase their li琀椀ga琀椀on risks. Therefore, employers should become familiar with the proposed over琀椀me rule and evaluate what changes they may need to adopt if the rule is implemented as proposed. Employers can

2024 Employee Benefits Market Outlook 17 review their employees’ compensa琀椀on to determine which of their employees may be impacted. A昀琀er reviewing a昀昀ected employees’ salaries, employers can further prepare by determining whether to increase employees’ salaries to the new threshold to maintain their exempt classi昀椀ca琀椀on or reclassify exempt employees to nonexempt status and pay them over琀椀me for all hours worked over 40 in a workweek. Addi琀椀onally, under the FLSA, an employee’s job 琀椀tle is not determina琀椀ve of whether they are exempt. Therefore, employers can also prepare for the new over琀椀me rule by audi琀椀ng their exempt employees’ job du琀椀es to determine whether the du琀椀es and responsibili琀椀es those workers are actually performing sa琀椀sfy the FLSA’s du琀椀es test for the white- collar exemp琀椀ons. Employers can then update employee job descrip琀椀ons and du琀椀es to accurately re昀氀ect the work those employees perform. Moreover, many states and even some locali琀椀es have their own over琀椀me requirements that di昀昀er from the FLSA. To avoid poten琀椀al viola琀椀ons and penal琀椀es, employers need to be familiar with all laws that apply to their organiza琀椀ons. If the DOL’s over琀椀me rule becomes 昀椀nal, it will signi昀椀cantly impact many organiza琀椀ons in 2024. Understanding the FLSA’s proposed over琀椀me rule and its poten琀椀al impacts allows employers to prepare, adapt and set their organiza琀椀ons up for long-term success. Savvy employers can use the proposed rule as an opportunity to revisit their exemp琀椀on determina琀椀ons more broadly, bolster their organiza琀椀ons’ 昀椀nancial stability and protect against poten琀椀al legal risks.

2024 Employee Benefits Market Outlook - Page 18

2024 Employee Benefits Market Outlook 19 MHPAEA’s parity requirements apply to group health plans for employers with more than 50 employees as well as insured health plans in the small group market due to an ACA reform. The mental health parity law doesn’t require employer-sponsored health plans to o昀昀er any speci昀椀c mental health bene昀椀ts. It simply requires that they not make it more challenging for employees to use their plan to access care for a mental health condi琀椀on or substance use disorder than to access medical care. Simply put, it should be just as easy for an employee to get treated for a behavioral condi琀椀on as it is if they have asthma, diabetes or other common health condi琀椀ons. According to the Departments, people seeking MH/SUD care coverage con琀椀nue to face greater barriers when seeking these bene昀椀ts than when seeking medical or surgical bene昀椀ts. The proposed rule is intended to strengthen MHPAEA’s requirements and provide guidance to health plans on how to comply with the law’s requirements. Employers play a key role in upholding the MHPAEA and can prepare for the proposed rule by reviewing their current health plans and evalua琀椀ng the parity in care for MH/SUD bene昀椀ts. Embracing Innovative Solutions for Student Loan Debt Relief The U.S. Department of Educa琀椀on’s COVID-19 relief for student loans, which paused student loan payments and set the interest rate to zero percent, has ended. On Sept. 1, 2023, student loans began accruing interest once more, and payments restarted in October. This has signi昀椀cantly impacted millions of American workers with student loan debt and their employers. According to the Federal Reserve, roughly 43.5 million Americans had student loan debt at the end of 2022, totaling over $1.7 trillion. This accounts for roughly 1 in 5 adults. With renewed interest accrual, many employees may face addi琀椀onal struggles paying o昀昀 their loans. As a result, employees are increasingly looking to their employers for student loan assistance. The impacts of student loan debt are felt most heavily by younger genera琀椀ons, in par琀椀cular those under the age of 40. These borrowers tend to have the highest outstanding student loan debt compared to older genera琀椀ons. Student loan debts can have a signi昀椀cant impact on employees’ mental, physical and 昀椀nancial wellness, resul琀椀ng in many borrowers experiencing mental health issues, such as anxiety, depression, insomnia and panic a琀琀acks, because of their student debt. Moreover, when student loan debt causes stress to employees, not only can it reduce workplace produc琀椀vity, performance and morale, but it may also lead to high rates of employee turnover as employees seek employers with be琀琀er student loan assistance programs or higher compensa琀椀on packages. Highly educated workers are o昀琀en among organiza琀椀ons’ most skilled and experienced workers; however, this o昀琀en correlates with higher levels of student debt. Therefore, employers may lose some of their most valued employees if these workers leave for new opportuni琀椀es. Student loan assistance is also an琀椀cipated to play a crucial role in a琀琀rac琀椀ng recent graduates in 2024. Since many 2024 graduates expect to carry student loan debt, their debt will in昀氀uence the jobs they consider upon gradua琀椀on. As a result, student debt relief programs will likely become increasingly more widespread as employers look to a琀琀ract and retain younger genera琀椀ons of workers in 2024 and beyond.

2024 Employee Benefits Market Outlook 20 Considering these trends, it’s not surprising that many employers are responding to employee wants and expecta琀椀ons by expanding student debt relief bene昀椀ts. As more employers embrace this trend, they’re o昀昀ering various student debt-related bene昀椀ts, including student loan repayment assistance, 昀椀nancial literacy and planning services, student loan contribu琀椀on plans, re琀椀rement savings and tui琀椀on assistance. In addi琀椀on to helping individuals pay o昀昀 student debt, these programs can show employees they’re valued by their employers, increasing employee engagement, sa琀椀sfac琀椀on and reten琀椀on and lowering their loan repayment-related stress. Recent legisla琀椀ve changes have expanded the student loan bene昀椀ts that employers can o昀昀er in 2024. Under the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act), employers can pay employees up to $5,250 per year for student loan repayments as part of an educa琀椀onal assistance program. While many employers have taken advantage of this op琀椀on to provide tui琀椀on reimbursement in 2023, allowing employers to simultaneously develop workforce talent and boost employer branding and employee engagement, more employers are expected to take advantage of this law in 2024 to assist employees with student loan debt. The law is currently set to expire on Dec. 31, 2025. However, there is a possibility that the law will be revised or amended, extending the expira琀椀on date or making the law permanent. The SECURE 2.0 Act, e昀昀ec琀椀ve Jan. 1, 2024, will also provide employers with another means to assist employees with student debt in the upcoming year. This act will allow employers to provide matching employee contribu琀椀ons under a 401(k) plan, 403(b) plan or SIMPLE IRA with respect to quali昀椀ed student loan payments. It’s intended to enable employees to pay o昀昀 student loan debts while simultaneously contribu琀椀ng to their 401(k)s, which has historically been di昀케cult for employees to manage. This is the 昀椀rst 琀椀me a law will link employee payment of student debt with de昀椀ned contribu琀椀on re琀椀rement plans, making it an a琀琀rac琀椀ve o昀昀ering for employers in 2024. As managing student loan debt becomes an increasing burden for employees, many employers are considering expanding student loan assistance bene昀椀ts to a琀琀ract and retain talented individuals in 2024. The Biden administra琀椀on is also making another a琀琀empt to address student loan forgiveness through nego琀椀ated rulemaking under the Higher Educa琀椀on Act. This proposal, which is expected to be 昀椀nalized in 2024, seeks to establish a new student loan forgiveness program for certain borrowers. Groups of borrowers that are being considered for eligibility include those who currently have balances larger than what they originally borrowed, entered repayment at least 25 years ago, a琀琀ended career-training programs that created “unreasonable” debt loads, provided “insu昀케cient” earnings or have an “unacceptably” high student loan default rate, and borrowers who are eligible for exis琀椀ng student loan forgiveness programs but haven’t applied. If passed, borrowers wouldn’t be a昀昀ected un琀椀l the summer or fall of 2024 at the earliest. Addi琀椀onally, the Biden administra琀椀on’s student loan forgiveness plan wouldn’t a昀昀ect all borrowers. These recent developments indicate that student loan assistance bene昀椀ts are likely here to stay. By o昀昀ering student loan support in 2024, employers can show employees they’re valued as whole people and provide workers with much-needed 昀椀nancial assistance and support, increasing employee reten琀椀on, produc琀椀vity, engagement and happiness. Employers who take advantage of these opportuni琀椀es in the upcoming year will likely gain a compe琀椀琀椀ve advantage over organiza琀椀ons that fail to support their indebted workers.

2024 Employee Benefits Market Outlook 21 Increased Adoption of Fertility and Family-building Benefits In the wake of the U.S. Supreme Court’s Dobbs v. Jackson Women’s Health Organiza琀椀on decision, which ended federal protec琀椀ons for abor琀椀on rights and permi琀琀ed states to implement their own regula琀椀ons, reproduc琀椀ve health care bene昀椀ts were a key issue for employers in 2023. This will likely con琀椀nue in 2024. In the a昀琀ermath of the Supreme Court decision, states have adopted divergent abor琀椀on policies, with some enshrining abor琀椀on access in the state cons琀椀tu琀椀on and others outlawing the procedure en琀椀rely. This has created legal complexity for employers with employees in states with vastly di昀昀erent abor琀椀on policies. Furthermore, some states require abor琀椀on coverage to be included in private health insurance plans; these regula琀椀ons may require private health insurance plans to provide abor琀椀on coverage with no copayment or with any plan that o昀昀ers prenatal care. Other states limit coverage to certain circumstances, including cases of life endangerment, rape and incest. In response to increasingly restric琀椀ve state abor琀椀on laws, some employers have started o昀昀ering separate reproduc琀椀ve health bene昀椀ts, including covering related travel expenses with a relief fund or one-琀椀me bonus. Other employers are enhancing abor琀椀on coverage under their group health plans to ensure employees have access to reproduc琀椀ve health care. Employers providing bene昀椀ts for legal reproduc琀椀ve care will need to assess the implica琀椀ons of o昀昀ering these bene昀椀ts as abor琀椀on laws evolve. The Dobbs v. Jackson decision has also placed heightened importance on the issue of access to contracep琀椀ve services. On Jan. 30, 2023, the HHS proposed a rule to strengthen access to birth control coverage under the ACA. If 昀椀nalized, this

2024 Employee Benefits Market Outlook 22 rule would allow women enrolled in ACA plans to obtain birth control, regardless of employer exemp琀椀ons. The proposed rule would eliminate the moral exemp琀椀on, which was put in place in 2018, that allows employers to opt out of providing contracep琀椀ve services due to their moral convic琀椀ons. It would also create an independent pathway for individuals enrolled in plans arranged or o昀昀ered by objec琀椀ng en琀椀琀椀es to make their own choices regarding contracep琀椀ve services directly through a willing contracep琀椀ve provider without any costs. This would allow women and covered dependents to navigate their own care and obtain birth control if their plan or insurer has a religious objec琀椀on. The proposed rule would, however, allow the exis琀椀ng religious exemp琀椀on for en琀椀琀椀es and individuals as well as the op琀椀onal accommoda琀椀on for coverage. Employers should con琀椀nue to monitor this rule in 2024. Even when not required, providing employees with access to reproduc琀椀ve health care and contracep琀椀ves can help organiza琀椀ons stay ahead in a 琀椀ght labor market. Since experts expect employers’ labor challenges to con琀椀nue in 2024, many employers are expanding fer琀椀lity and family-building bene昀椀ts to a琀琀ract and retain talented individuals. Many Americans face barriers or struggle to build families. According to the World Health Organiza琀椀on, 1 in 6 people struggle with infer琀椀lity—de昀椀ned as the inability to conceive a昀琀er a full year of trying without the use of contracep琀椀ves. Infer琀椀lity a昀昀ects men and women and can put incredible strain on rela琀椀onships, causing partners to feel inadequate, depressed, ashamed or guilty. In turn, this can impact workplace dynamics, causing employees to be distracted, stressed and less produc琀椀ve. Fer琀椀lity and family-building bene昀椀ts are part of a growing trend of o昀昀ering employees bene昀椀ts that support their 昀椀nancial, mental and emo琀椀onal well-being. Employees who receive family-building bene昀椀ts typically feel more loyal and commi琀琀ed to their employer and stay at their jobs longer. Addi琀椀onally, women who received in vitro fer琀椀liza琀椀on with the support of their employer tend to return to work a昀琀er maternity leave. Since work and family life are two of the most important components of an individual’s life, employers who support employees’ family needs and expecta琀椀ons can show employees they’re valued as human beings, increasing engagement, produc琀椀vity, sa琀椀sfac琀椀on and reten琀椀on. While employers may be hesitant to extend coverage op琀椀ons amid rising health care plan costs, many organiza琀椀ons will expand fer琀椀lity bene昀椀ts to improve a琀琀rac琀椀on and reten琀椀on in 2024. Family-building bene昀椀ts are valued by employees regardless of their gender iden琀椀ty or rela琀椀onship status. This bene昀椀t can provide services for single and LGBTQI+ employees as well as heterosexual and same-sex couples who depend on fer琀椀lity treatment for their family-building journey. Family-building bene昀椀ts can also include menopause support and trea琀椀ng testosterone de昀椀ciency. Savvy employers recognize fer琀椀lity and family-building bene昀椀ts as a crucial aspect of diversity, equity and inclusion (DEI) programs and ensure all employees have access to the resources and support they need to start a family. As a result, many employers are planning to increase family health bene昀椀ts within the next few years. While these bene昀椀ts o昀琀en improve the a琀琀rac琀椀on and reten琀椀on of young genera琀椀ons of workers who are looking to start or build their families, the impact of these bene昀椀ts extends well beyond a昀昀ected individuals. Many employees want their employer to support women’s health and DEI ini琀椀a琀椀ves. Comprehensive family-building bene昀椀ts demonstrate that the organiza琀椀on cares about all its employees. In turn, when employees feel welcomed and supported in the workplace, employee engagement, produc琀椀vity and reten琀椀on are likely to increase. This can also help boost the organiza琀椀on’s employer brand to current and prospec琀椀ve employees and the public as well as improve its bo琀琀om line. While many employers are hesitant to adopt fer琀椀lity and family-building bene昀椀ts because they’re concerned with raising health care costs, research indicates that these bene昀椀ts may not be as expensive as some employers think. In fact, many organiza琀椀ons don’t experience a signi昀椀cant increase in costs when they o昀昀er fer琀椀lity coverage. O昀昀ering these bene昀椀ts can help employees access cost- e昀昀ec琀椀ve quality care and improve and boost a琀琀rac琀椀on and reten琀椀on and DEI e昀昀orts in 2024.

2024 Employee Benefits Market Outlook - Page 23

2024 Employee Benefits Market Outlook 24 combat this, many employers will focus on providing bene昀椀ts educa琀椀on to help guide employees on their journeys to be educated health care consumers, maximize their bene昀椀ts and understand the importance of rou琀椀ne care. They should consider covering the following topics in preven琀椀ve care educa琀椀on: • An overview of preven琀椀ve care, highligh琀椀ng the di昀昀erence between preven琀椀ve and diagnos琀椀c care • The importance of preven琀椀ve care, along with associated costs • Preventable health condi琀椀ons (especially chronic condi琀椀ons) and their poten琀椀al risk factors • Preven琀椀ve care’s bene昀椀t of early health condi琀椀on detec琀椀on, which can help employees save their hard-earned health care dollars • Preven琀椀ve care services that the organiza琀椀on’s health plan o昀昀ers, highligh琀椀ng undervalued and underused preven琀椀ve health bene昀椀ts (e.g., bene昀椀ts provided under the ACA) • Ideas or sugges琀椀ons to help encourage employees to use preven琀椀ve services or screenings (e.g., a spreadsheet or poster that outlines recommending 琀椀ming for common preven琀椀ve services) It comes down to helping employees be educated on the preven琀椀ve care services a health plan o昀昀ers, their poten琀椀al health risk factors and the bene昀椀ts of preven琀椀ve medicine. A昀琀er a founda琀椀onal educa琀椀on is in place, employers can help increase access to preven琀椀ve care opportuni琀椀es. Many employees are looking for ways to stretch their hard-earned dollars further, and employers can step in to provide that much-needed guidance and underline the importance of preven琀椀ve care.

2024 Employee Benefits Market Outlook - Page 25
2024 Employee Benefits Market Outlook - Page 26

2024 Employee Benefits Market Outlook 27 Conclusion Many of the workplace challenges employers dealt with in 2023 will con琀椀nue through 2024 and beyond. While some of these challenges are familiar, others are not. Consequently, employers may need to operate more e昀昀ec琀椀vely and e昀케ciently to set themselves apart from their compe琀椀琀椀on. This will likely require employers to proac琀椀vely embrace and simultaneously respond to the evolving employee bene昀椀ts market. Cri琀椀cal to employers’ success in 2024 will be protec琀椀ng workers’ health and well-being, accommoda琀椀ng employees’ needs and desires, embracing cost-e昀昀ec琀椀ve strategies, and priori琀椀zing a琀琀rac琀椀ng and retaining skilled workers. Organiza琀椀ons that prepare and act quickly will stand out in today’s compe琀椀琀椀ve market. This may also allow them to weather the challenges this year may bring and posi琀椀on themselves for sustained growth and success. The best strategies will vary by workplace, but being aware of the trends and themes presented in this Market Outlook can guide employers as they plan and establish bene昀椀ts strategies in 2024. Contact us for more informa琀椀on about these trends and to request addi琀椀onal resources on these and other important workplace topics. This ar琀椀cle is not intended as legal or professional advice. © 2024 Zywave, Inc. All rights reserved.

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