By Canoe Benefits
If your group benefits renewal came in higher than expected this year, you’re not alone. Canadian group health costs are projected to rise 8.3 percent by the end of 2026, more than four times faster than inflation, according to Aon’s 2026 Global Medical Trend Rates Report. For HR professionals and plan administrators managing tight budgets, that number is hard to ignore.
Most employers aren’t looking to cut coverage or push costs onto employees. According to a recent survey by MBWL International and Normandin Beaudry, 65 percent of Canadian employers say controlling benefits costs is their top priority this year, and most are looking for smarter ways to manage what they already have rather than reducing what they offer.
What's Behind the Increase
Benefits cost pressure isn’t coming from one single source. Higher utilization, aging workforces, chronic conditions, and the growing cost of prescription drugs are all contributing to the trend.
Prescription drugs are playing a particularly significant role. GLP-1 therapies like Ozempic, originally prescribed for Type 2 diabetes and now increasingly used for weight management and cardiovascular risk reduction, are driving up drug plan costs across the country. Cardiovascular disease, cancer, high blood pressure, and musculoskeletal conditions continue to be the top claim drivers, and these are long-term health needs that require consistent, ongoing coverage.
The combination of higher utilization and more expensive therapies means group benefits plans are under sustained pressure, and that pressure is unlikely to ease significantly in the near term.
Why Generic Drugs Are Part of the Answer
One of the most practical tools available for managing prescription drug costs is generic substitution. Generic drugs approved by Health Canada contain the same active medicinal ingredients as brand name drugs and are available at significantly lower costs.
Under most group benefits plans, when a generic version of a medication becomes available, the plan pays based on the cost of the lowest-priced generic. This doesn’t mean employees have to stop taking their medication. It means the plan covers the generic cost, and employees who prefer the brand name version pay the difference unless a medical exception is approved.
Generic substitution alone won’t solve rising benefits costs, but it’s a meaningful lever that plan sponsors can use to protect plan sustainability without reducing coverage.
Practical Strategies for Managing Costs
There are several approaches employers can take to manage group benefits costs without compromising what they offer employees:
- Encourage generic drug substitution. Make sure employees understand how generic substitution works and why it matters for the long-term health of the plan.
- Promote smart plan usage. Dispensing fees vary significantly between pharmacies. Employees who fill prescriptions at lower-fee pharmacies, like Costco, can reduce out-of-pocket costs and ease pressure on the plan. The same applies to dental care, where costs can vary considerably between providers.
- Review your formulary and plan design. Work with your Canoe advisor to assess whether your current structure is managing high-cost drug therapies effectively.
- Use employee education as a cost management tool. Clear, practical communication about how the plan works and how employees can get the most from it is one of the lowest-cost strategies available for managing benefits costs over time.
- Review plan performance mid-year. Looking at utilization data before renewal gives you more room to make adjustments before cost pressures land.
Talking to Employees About Plan Sustainability
Plan member education is one of the most underused tools available to employers, and it doesn’t have to be complicated to be effective. Employees who understand how their coverage works are better equipped to make decisions that benefit both them and the plan.
Dispensing fees vary between pharmacies, and lower-fee options like Costco can make a meaningful difference over time. Shopping around for dental providers is reasonable, since costs can vary significantly between clinics. Generic medications offer the same therapeutic value as brand name drugs at a fraction of the cost. These are straightforward things employees can act on when they know about them.
A simple, clear communication that walks employees through how the plan works and where they can make smarter choices tends to go further than a dense benefits guide that gets filed away. Framing it around helping people get more value from their coverage makes it easier to receive.
If you’re not sure how to approach benefits cost management or want to review whether your group benefits plan is set up to handle rising costs sustainably, connect with your Canoe advisor. They can help you assess where the pressure is coming from, identify options that protect coverage, and build a plan that works for your organization long term.