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Authors: Nichole Johnson Molly Beer Erik Henry Smetana Laura Ford Maddison Grigsby

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Higher education continues to navigate meaningful shifts — from evolving Department of Education policies that influence funding, endowments, student loans and enrollment, to a healthcare renewal market that remains complex and competitive. These dynamics create real pressure for faculty, staff and the HR teams working to balance benefits, compensation and culture within tighter budgets.

The institutions gaining the most traction today are the ones treating total rewards as a connected, strategic ecosystem rather than a collection of separate line items. They're using this moment to strengthen alignment, elevate the employee experience and build a more sustainable path forward.

What the data shows

Trust and confidence in senior leadership is the #1 driver of both talent attraction and retention in US higher education.


Source: Gallagher Organizational Wellbeing Poll: January 2025

66% of US higher education employers rank addressing affordability as their top 2026 benefits priority.


Source: Gallagher Organizational Wellbeing Poll 4 Results: December 2025

More than seven in ten US employees (72%) say their financial situation influences the healthcare decisions they make, and nearly nine in ten (88%) recognize a connection between financial stress and mental health.

Source: Gallagher's 2025 Financial Benchmarks Report

Understanding the drivers behind rising healthcare costs

The most challenging renewal environment in over a decade arrived in 2025. The cost drivers were structural — and so are the opportunities to address them.

Trend drivers

  • Medical inflation catching up after post-COVID contract renegotiations
  • Growth of prescription drugs for chronic conditions, including GLP-1 medications and cell and gene therapies
  • Rising prevalence of cancer, heart disease and chronic conditions
  • Behavioral health costs driven by high demand and limited provider supply

Trend mitigators

  • AI is improving provider quality and reducing fraud and waste in billing
  • Biosimilars are introducing competition into the specialty drug market
  • Growing adoption of innovative health plan management tools, such as care navigation platforms, condition-specific management programs and cost transparency solutions
Based on Gallagher's 2025 US Healthcare Carrier Trend Survey, medical costs are projected to rise in the 8-9% range and prescription drug costs in the 11-12% range. Combined, employers may experience an overall healthcare cost trend approaching the 9-10% range.

Clinical areas shaping the 2026 benefits priorities

Gallagher's 2025 Benefits Trends and Benchmarking identifies three clinical areas that will play an outsized role in employer benefits strategy heading into 2026, particularly for organizations facing concentrated healthcare risk.1

Weight and metabolic health

Metabolic conditions remain among the fastest‑growing drivers of both medical and pharmacy spend. According to Gallagher benchmarking:

  • 61% of US employers already have medication‑assisted weight management programs in place.
  • An additional 11% are actively adding these programs.1

The acceleration of GLP‑1 utilization has intensified employer focus on obesity, diabetes, metabolic syndrome and related cardiovascular risk — conditions that materially influence long‑term healthcare costs and population health outcomes.

Cancer care

Cancer remains one of the most significant cost drivers across employer populations. Gallagher data consistently identify cancer as a leading contributor to catastrophic claims, stop‑loss exposure and rising per‑member costs, with prevalence and spend increasing year over year.1,2

In response, employers — particularly in higher education — are placing greater emphasis on:

  • Earlier detection and expanded screening access
  • Care navigation and treatment coordination
  • Centers of Excellence and precision‑based care strategies

For education employers, where cancer frequently appears among the top medical and stop‑loss claim categories, proactive cancer programs are increasingly viewed not only as a clinical necessity but also as a direct cost‑containment strategy.

Women's health

Employers are broadening their focus beyond maternity to address women's health across the full lifecycle. Gallagher data show growing investment in:

  • Reproductive and family‑forming care
  • Chronic and autoimmune conditions that disproportionately affect women
  • Prenatal, maternity and postpartum support

These investments are increasingly viewed as both a cost‑management strategy and a workforce imperative, given that many women's health challenges occur during prime working years and are closely tied to productivity, engagement and retention.

PROFESSIONAL ADVICE

Start with your claims data — it will tell you more than any benchmark. Identify primary cost drivers impacting your spend. Next, uncover specific high-cost areas and opportunities for containment. Work with your consultant to understand the full landscape of solutions available. Gain evidence-based insights and emerging healthcare technologies to drive cost-effective, high-quality care. Then, implement and measure. Through strategic vendor partnerships and data-informed clinical strategies, we focus on improving outcomes and reducing total healthcare spend.
“
Organizations that leverage benchmark data to design focused, cost-effective benefit plans that serve the entire workforce tend to achieve better outcomes than those with overly complex or potentially wasteful plans. The most effective strategies aren't the most complex. They're the most focused.
Nichole Johnson, managing director, Higher Ed and K-12, Gallagher

Financial resilience: The overlooked foundation of workforce stability

Employers increasingly recognize financial wellbeing as a core workforce issue — and a meaningful driver of downstream costs. Gallagher's 2025 Financial Benchmarks highlight a clear gap between stability and resilience: nearly one-third of employees have no emergency savings, and another quarter have saved less than three months' expenses. Without a financial buffer, even modest unexpected costs — including routine healthcare expenses — can lead to delayed care, higher claims and increased stress that ultimately shows up in productivity and retention.

That vulnerability directly influences how employees use their benefits. Based on 2026 Financial Health Assessment Data, 74% agree that healthcare decisions are made with finances in mind, and 91% agree that financial stress is connected to their mental health. When pressure leads employees to delay preventive care, skip prescriptions or postpone treatment, the cost rarely disappears. It resurfaces later through higher-acuity claims and higher prices. The result is a workforce that appears healthy on paper but quietly drives avoidable utilization and rising plan costs.

PROFESSIONAL ADVICE

Running out of money before the next paycheck is the leading source of employee stress, followed by retirement planning, then dealing with debt, inflation and stock market volatility. The roadmap is clear: budgeting tools and one‑on‑one financial coaching are the backbone of effective financial wellbeing programs, supported by a layered approach that starts with financial literacy, expands to coaching and culminates in personalized planning. Gallagher data show that 51% of employers now offer one‑on‑one financial coaching, reflecting growing recognition of this need.
Regulatory change reinforces the opportunity. SECURE 2.0 expanded employer flexibility through features such as automatic enrollment, auto‑escalation and new distribution options. Employers that have not revisited retirement plan design since these changes took effect may be leaving meaningful flexibility — and employee support — on the table.2
“
We know employees are feeling increasingly stressed about their finances, and we know that this stress directly impacts their health. It is not only a financial issue, it is a health issue. It affects their overall physical and mental wellbeing. Building greater financial resiliency is about confronting the convergence of health and financial decision-making with employees with education, coaching, and advice.
Molly Beer, national practice leader, Retirement and Defined Contribution, Gallagher

The talent strategy

Compensation: Four trends worth watching

One-third of US organizations are reevaluating compensation processes for 2026. Without a clear philosophy, pay decisions accumulate inconsistently. The result is an equity problem that is difficult to reverse and costly to ignore.

A clear philosophy ties every pay decision to mission, equity and resource stewardship, giving leaders a consistent framework and employees a reason to trust the outcome.

Regular benchmarking against peer institutions and competing sectors identifies where retention risk actually lives. Phased multi-year adjustment plans close gaps without a single-cycle budget shock.

40 to 50% of US organizations use data to inform workforce decisions. The institutions gaining ground track turnover patterns, retirement trends and compensation gaps to surface risk before it becomes a vacancy.

On campuses where pay scales move slowly, career development is often the more powerful retention tool. Clear job architecture and defined progression criteria signal that the institution has a plan for its people, not just its positions.

PROFESSIONAL ADVICE

A phased multi-year approach to market alignment is more credible than waiting for a future budget cycle and more defensible to shared governance bodies that scrutinize every dollar. Identify the roles with the highest talent risk, build a sequenced plan to close those gaps and communicate it.
Silence about pay isn't neutral. Employees interpret it as indifference. Use data visualizations to make the case with leadership. Metrics on market percentile, pay equity ratios and turnover rates convert a cost request into a strategic conversation.
“
A well-defined compensation philosophy reinforces institutional values such as fairness, transparency and shared purpose. In higher education, where resources are often constrained and scrutiny is high, this clarity helps build trust with faculty, staff and administrators. It transforms compensation from a transactional expense into a strategic tool.
Erik Smetana, managing director, compensation Consulting, Public Sector & Higher Ed, Gallagher

Equipping leaders for today's workforce

According to Gallagher's Organizational Wellbeing Poll, only 44% of organizations are actively working to enhance manager development training in 2026. On many campuses, new employees are asking about their next career move within their first three months, while frontline leaders promoted from faculty or technical roles are being asked to facilitate those conversations without ever having had them modeled for them.

What effective development looks like:

  • Active learning with at-work assignments for immediate application
  • DiSC assessments, 360-degree feedback and EQ assessments to build self-awareness
  • Virtual delivery with one-up leader involvement throughout, including session summaries and follow-up prompts to reinforce learning in one-one-one conversations
  • One-on-one Chief Human Resources Officer (CHRO) coaching to drive cultural change

PROFESSIONAL ADVICE

Assess your institution's specific culture and leadership population and help ensure that what's offered aligns with your campus culture and priorities. While a private-sector approach may be financially appealing, most leaders struggle to put the learning into practice in a shared-governance environment. In higher education, many leaders came up through faculty or technical roles and were never equipped with the skills today's workforce demands. Develop leaders at all levels so that programs reinforce one another.
“
A significant part of what we are doing is updating leadership skills that may have worked ten years ago but no longer resonate with the higher education workforce in 2026. Equipping leaders to navigate today's challenges has been a key focus for many of our clients.
Laura Ford, SPHR ACC, senior principal consultant, Leadership Advisors, Gallagher

The communication layer

Every strategy in this article depends on employees understanding it, believing it and trusting it. Few institutions are currently equipped to deliver that: 57% of US organizations identify change management as a critical skill for internal communications teams, yet 61% lack a formal approach to it.

Reach people, not inboxes

Employees can receive hundreds, or even thousands, of emails per day. High volumes of change communication in the workplace drive:
  • Leadership distrust ↑ 30%4
  • Burnout ↑ 24%4
  • Sense of overload ↑ 23%4

The answer is more precise communication. 75% of US organizations say audience segmentation is critical, but only 20% execute it consistently. Engaging teams around purpose, strategy and values (67%) is the top communication priority for 2026, well above improving manager communication (53%) and boosting leadership visibility (47%).4

Institutional mission lands where transactional benefits messaging does not.

PROFESSIONAL ADVICE

Build a process that includes how you'll communicate with employees as you plan the change itself — it keeps people informed, reduces confusion and builds trust. Segment your audience and use varied formats: short scannable emails, informal videos and infographics.
Establish a centralized platform as the single source of truth for HR information, so employees never have to wonder where to find it. And keep it human. According to Gallagher's State of the Sector Report 2026, a more human tone reduces burnout by 15% and leader distrust by 10%.
“
Employees today want more than just transactional conversations about compensation and benefits. They want to understand the broader picture and feel aligned with the organization's direction. Organizations that communicate at that level are the ones building real trust.
Maddison Grigsby, US sales leader, Communications, Gallagher

Strengthen your people's strategy with these foundational steps

Know your 20%. The healthcare cost strategy begins with claims data. 20% of your population makes up 80% of your claims spend.5 Identify the conditions and members driving the majority of spend. Impact those top conditions by providing the right resources for prevention and for support of those members on their care journey.
Close the perception gap. HR underestimates the share of employees delaying medical care due to financial pressure. That gap leads to benefits investments aimed at the wrong problems — and higher‑acuity claims arriving later.
Communicate before you change. Formal change communication infrastructure isn't optional in higher education right now. Plan your internal communication in tandem with the change. Not after it.

Based on Gallagher's Higher Education Market Update Series, Webinar 3, February 2026.

Author Information

Sources

1 "2025 US Workforce Trends Report: Benefits Benchmarks," Gallagher, July 2025.

2 "48th US Healthcare Carrier Trend Survey," Gallagher, September 2025.

3 "2025 US Workforce Trends Report: Financial Benchmarks," Gallagher, accessed 7 July 2026.

4 "2026 Workforce Trends Report Series: Employee Communications Report," Gallagher, accessed 7 July 2026.

5 "2021 Medical Expenditure Panel Survey Data (age 18-64)," Kaiser Family Foundation.

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