That was what the com demand in division and division 2 as well - and what they got was so much overdone that it breaks the game the other way around the enemies got suuuuuuuper sponges so hard that some content was left behind by the player base. - its clearly no fun as well.
I don't care about Division. Most Ubisoft games are not a measure of anything to me, and I didn't even bother with Division. But if you like comparing, let's go.
Best looter-shooter: Borderlands. Got sponginess? Yes.
Best arcade shooter: Doom Eternal. Got sponginess? Yes.
You just cannot make a game system with dmg and health were every instance of dmg exceeds every instance of health. Then, that system would make no sense.
I would say the first thing that needs to be done is HEAVILY tone down crit chance/damage modifiers, they are too abundant and inflate damage to broken levels.
Second, elemental damage needs to be more defined as borderline useless, existing raw damage completely overshadows whatever element perks does.
Third, character progression needs be more smooth, as right now something happens around level 30 when your characters explodes in power relative to enemies, so overall scalling needs to be adjusted.
My two cents
This. But most importantly, the cybernetics and enemy animations and AI aggression. Even if balance will be adjusted, and oneshots exceeding enemy health 20-fold will become less of a thing, enemies are still too slow and stupid to pose a threat.
Also, the whole enemy level scaling must be redesigned. The idea of gaining access to previously inaccessible areas by progressing with your character - this must be achieved through other means. At a certain level it becomes a race not to outlevel everything on the map. A race you're doomed to lose. At upper levels most of the map is very easy which brings about a 200% dmg modifier (on top of everything else which is broken).