Health benefits spending soars, but employee confusion persists

• Key Insight: Discover how benefit design failures create "functionally uninsured" employees despite rising employer spending.
• What's at Stake: Low utilization threatens retention, productivity and potential compliance or financial exposure.
• Supporting Data: Employers spend nearly $20,000 per employee; costs rose about 7% in 2026.
  Source: Bullets generated by AI with editorial review

Employers are now spending nearly $20,000 a year per employee on health insurance, yet many workers still don't understand what they're getting in return. 
Often, that's because companies are not communicating the right benefits, said 

Dan Thompson, chief benefits officer at Vensure, an HR and payroll outsourcing provider.

"Most employers are still picking health plans and developing the contribution strategy," Thompson said. "This, unfortunately, is not a fit for employees any longer. As employees have evolved, newer generations demand more unique benefits that are often missed." 

According to consulting firm Mercer, the average cost of employer-sponsored health insurance rose about 7% in 2026 from the prior year. Despite record spending on healthcare, many employers have been slow to modernize how benefits are delivered and communicated, Thompson said. 

Read more: Rising medical costs, inflation amplify employee financial stress

"Most employees still just look at deductibles to pick plans, or they go to HR and ask, 'What did I have last year? Can you just give me what I had last year?'" Thompson said. "This is so 1990s. Employers need to modernize and launch solutions to educate employees and make the new, modernized open enrollment process effortless." 

Thompson recently spoke to Employee Benefit News about the impact of low healthcare benefit utilization and what HR leaders can do to improve engagement. This interview has been edited for length and clarity. 

Why are so many employees still confused about health benefits despite record employer spending?
Employees are confused primarily due to the inability to use benefits. I call this being functionally uninsured. The pressures are very high on Americans who rely on employer-sponsored health plans. Premium increases have exceeded wage increases exponentially, outpacing the ability to afford healthcare. Most health plans in America through the employer-sponsored system are high-deductible health plans. Tragically, in many cases, the deductible is more than 10% of an employee's gross income. With the majority of employees today living paycheck to paycheck, an employee doesn't have the discretionary income to pay deductibles or co-pays. As a result, employees pill skip, are medication nonadherent and usually self-care using "Dr. Google."

Read more: How much employees pay for healthcare, by industry

Due to this catastrophic challenge with healthcare, obstructed by deductibles, premiums and copays, employees are circumventing traditional carrier networks and subscribing to models such as direct primary care or even seeking programs to find cheaper medications. As I have always said for the last decade or more, insurance becomes the catastrophic-only part of healthcare, and consumers should then shop the free market for things like medications and primary care.

Which benefits are employees most likely to overlook or underuse?
We have an epidemic in the United States called worksite benefits, often referred to as supplemental plans. Employees usually overlook and often underuse these benefits. Many employees fall into predatory practices where they get signed up for the wrong reasons to purchase these products. The problem inherently is the distribution channels of these products. Decades ago, traditional benefit brokers who are small practices leveraged these products by pushing very high, often egregious commission levels of premium. This puts pressure on the paycheck and often causes lower take-home pay. The employee then rarely uses the program.

Read more: As GLP-1 costs climb, more employers weigh dropping coverage in 2027

With the Consolidated Appropriations Act, brokers and advisors need to disclose compensation. HR leaders need to be intentional in reviewing these programs. The disparity can be five to 10 times the cost for the same product from company to company. The government is also looking at the unfair loss ratios of these products. This will create pressure for these establishments to ensure that consumers actually use these products.

Which employee populations are most likely to miss out on benefits they're eligible for?
Companies with diverse workforces often have a big miss when it comes to connecting with their populations about employee benefits. Employers need to be aware of employee needs, including drafting employee materials in native languages or providing onsite translators to talk with employees. Employers today can also offer benefits to part-time, seasonal or temporary staff. As a country, we've also evolved into gig workers. Employers can create benefits strategies to help gig workers gain affordable access to care.

How much does poor benefits utilization affect retention and productivity?
A key performance indicator of a benefits program is utilization. If employees aren't using a plan, it's a sure sign that something is wrong. Key areas for company leaders to look at include preventive care. How many employees are getting preventive physicals? How many employees are getting recommended screenings like mammograms? How can company leaders help guide employees toward healthier lifestyles?

What benefits are employers spending the most on that employees aren't actually using?
Utilization of EAP programs and telemedicine are the standouts. Employers who provide comprehensive EAP and telemedicine need to look closely at utilization. There has to be ongoing education and reminders about these benefits. Solutions providers that employers choose must be evaluated for modernized communication technology that drives behaviors leading to improved utilization.

What are the most effective ways to drive benefits engagement beyond open enrollment?
Employers today need to do more than a once-a-year open enrollment. Employers who want to drive highly effective benefits engagement are providing employees with technology platforms that use AI to constantly communicate with employees. AI platforms are receiving millions of questions about employee benefits. This is a sure sign that employers aren't providing enough direction. Employee decision-support technology isn't just an option, it's very necessary in today's employee benefits offerings.

If you could change one thing about how employers communicate benefits, what would have the biggest impact?
The greatest impact on how employers communicate benefits is to provide year-round communications to employees. Gone are the days of annual open enrollment. Employers must provide technology-driven tools, using generative AI or agentic AI solutions, to help educate employees quickly and accurately. This applies to both the front end and back end. Having this ongoing communication model with employees will help drive higher retention and higher satisfaction with benefits.