By Chadd Hodkinson/Gallagher
Public entity employers in 2025 faced significant challenges and opportunities as they continue to navigate workforce mobility, rising health care costs, and shifting employee expectations. With federal funding receding and budgets tightening, these organizations are rethinking strategies to attract, retain, and support talent. Below are the key trends shaping the landscape for public entity employers:
- Leadership and engagement investments
Public entities are increasingly focusing on leadership development and employee engagement to strengthen retention amidst growing competition for talent. Despite budget constraints, many organizations are prioritizing training programs, conducting surveys and implementing action plans to enhance organizational effectiveness.
Gallagher’s 2025 U.S. Benefits Strategy & Benchmarking Survey found:
- Nearly 48 percent of public entities rank retaining talent as a top operational priority, and 74 percent provide management or leadership development training.
- Additionally, 45 percent have conducted engagement surveys within the last two years, while 19 percent plan to do so in the next two years.
- Cost control strategies and technology ownership
Rising health care costs are prompting public entities to adopt proactive strategies such as self-funding, pooling of risk, and cooperative purchasing. Technology investments are also growing, with employers increasingly owning their benefit platforms and data to avoid becoming tied to a particular vendor and to minimize disruptions when moving from one vendor to another. Gallagher’s 2025 U.S. Benefits Strategy & Benchmarking Survey found:
- Approximately 58 percent of public entities self-insure their medical plans, and 50 percent have increased employee cost-sharing during their most recent renewal.
- By 2027, 25 percent of organizations plan to upgrade and add new HR technology solutions.
- Pharmacy benefit manager (PBM) contract revisions
Renegotiating PBM contracts presents an opportunity for public entities to achieve cost efficiency and transparency in prescription drug spending. These contracts are often complex and opaque, making it essential for organizations to work with partners who can thoroughly evaluate terms.
Gallagher’s 2025 U.S. Benefits Strategy & Benchmarking Survey found 18 percent of public entities conduct pharmacy contract reviews and negotiations, while more than 25 percent implement prescription drug plan design changes, including formulary exclusions and mandatory generics to control costs.
- Mental health prioritization
Mental health is taking center stage in benefits strategies, with public entities adopting virtual mental health services and standalone employee assistance programs (EAPs).
Gallagher’s 2025 U.S. Benefits Strategy & Benchmarking Survey found:
- Nearly 60 percent of organizations report emotional wellbeing became more important in 2025.
- Key components of emotional wellbeing initiatives include EAPs (94%) and virtual or telephonic mental health counseling (75%).
- Additionally, 21 percent of organizations deploy enhanced mental and behavioral health programming as a health care cost control tactic.
- Financial health optimization
As defined contribution plans replace pensions, public entities are enhancing supplemental retirement programs and expanding financial literacy efforts. These initiatives aim to help employees manage finances and achieve long-term goals.
Our 2025 survey found 56 percent of organizations provide financial literacy resources or seminars, and over 70 percent offer one-on-one appointments with financial planners for retirement plan participants.
Public entity employers are responding to fiscal uncertainty and workforce challenges with innovative strategies that balance cost control and employee experience. By investing in leadership, adopting proactive health care strategies, prioritizing mental health and enhancing financial wellbeing programs, these organizations are evolving to meet the demands presented in 2025 and beyond.
If you would like to discuss how these and other trends might impact your county, please contact Gallagher’s Chadd Hodkinson at chadd_hodkinson@ajg.com or Jeff Nielson at jeff_nielson@ajg.com.