The average rate of increase in medical costs is expected to reach 8.3% in 2026 in Canada, according to the latest Global Medical Trend Rates Report 2026 published by Aon plc, compared to 7.4% in 2025. By comparison, health insurance costs will increase by an average of 9.8% worldwide in 2026, versus 10% in 2025.

Rising healthcare spending

Several converging trends explain the acceleration in healthcare costs in Canada this year, starting with the turbulent international context.

Isabel Boyer, Vice President, Health Solutions for Canada at Aon, explained in an interview with the Insurance Portal that the rates implemented by the United States are having an indirect effect on health plans. “Even if tariffs aren’t directly imposed on healthcare and medications, they impact the global supply chain,” she observes. The manufacturing cost of American drugs is increasing due to the rising price of components imported from China, among other things.

For his part, Frédéric Leblanc, Strategic Leader, Drug Programs, at iA Financial Group, has not noted any price increases related to the tariffs. “The long-term risk lies primarily in drug shortages and the delayed launch of new molecules in Canada,” he explains.

“Faced with current events, people are experiencing physical and mental fatigue,” believes Isabel Boyer. “They’re taking care of themselves: we’re seeing a surge in the use of massage therapists and physiotherapists, as well as mental health professionals.”

Overall, supplemental health care accounts for just over a third (36%) of total eligible expenses, according to Medavie’s 2025 claims data.

This means that medications account for nearly two-thirds of expenses (64%). And some medications account for a particularly large share of these costs. This is especially true of GLP-1 agonists, which lower blood sugar, increase satiety, and slow digestion. Some, such as Ozempic, are used for diabetes, which is one of the largest therapeutic categories in terms of eligible expenses. Others, such as Wegovy, target weight loss, which is the fastest-growing therapeutic category in terms of costs.

“There is increasing pressure on plan sponsors to add coverage for GLP-1 agonists for weight loss,” says Boyer. Employers who choose this option should anticipate an increase in their healthcare costs. However, Health Canada's approval of generic versions, which the industry hopes will materialize in 2026, should significantly reduce the cost of these medications.

More broadly, Frédéric Leblanc points out that pharmaceutical innovation is driving up the average price of medications. He indicates that specialty drugs represent approximately 30% of a plan's expenses, yet account for only 1% of reimbursement claims. These include treatments for cancer and rare diseases, such as cystic fibrosis. Among the ten most expensive medications for iA Financial Group based on overall spending for all its employer plan sponsors, seven are specialty drugs.

“Some specialty medications are valuable because they offer health or disease management benefits, but they are taking up an increasingly large portion of benefits plans,” says Andrée-Anne Bourgeois, Vice-President, Group Underwriting, Actuarial and Destination, at Desjardins Insurance.

Leblanc adds another factor: the growing Canadian population means there are more claimants year after year, which automatically drives up drug-related expenses.

Five sources of savings considered by employers

The use of cost control measures in plan design and administration is among the initiatives that Canadian plan sponsors intend to implement by 2026, according to Aon.

Indeed, insurers offer a wide range of financial arrangements, from comprehensive coverage to self-insured plans, including intermediate solutions. “The more risk employers take, the lower their premiums,” says Boyer. “However, the larger they become, the more risk they can take on: some can save money by negotiating a new agreement with their insurer.”

According to Aon, employers will also continue to focus on promoting their health and wellness programs. Many offer an Employee and Family Assistance Program (EFAP), which facilitates access to healthcare while reducing absenteeism. “There is a decrease in the severity of illnesses, which is accompanied by a reduction in healthcare costs for employers in the long term,” says Boyer. As for wellness programs, which offer allowances for gym memberships, for example, they encourage employees to take care of their well-being and help reduce stress, which can exacerbate other health problems.

Another potential source of savings is cost control measures in plan design and administration. These include, among other things, the implementation of deductibles and maximum annual benefits, whether per practitioner type or for all paramedical expenses combined. They also include usage controls, such as mandatory generic submission for medications. “Generally speaking, we will require participants to take the generic version of a medication whenever possible,” says Boyer.

Prior authorizations for specialty medications, which require medical justification for reimbursement, and step therapy, which mandates starting with first-line medications before moving on to more expensive options, are also among the plan clauses that help contain expenses. Bourgeois, from Desjardins, believes that “this ensures both accessibility for those who need it and fairly effective cost control.”

For his part, Frédéric Leblanc explains: “We have an aggressive approach to transitioning to biosimilars, which are generic versions of biologics. If it’s the first time someone is using a biologic, without any comorbidities or specific circumstances, we want them to start with a biosimilar.”

Flexible plans, which give participants a choice of different levels of coverage, are another possible solution. “Insurers are implementing flexible plans to address the diverse needs of their workforce,” says Boyer, illustrating her point with the examples of a young person entering the workforce, a parent of two, and an employee nearing retirement.

Finally, some companies are forced to reduce the benefits offered, for example, by eliminating dental coverage, or to restrict them by adjusting eligibility criteria, among other things. “That’s not what we recommend to our clients,” explains Boyer. “We want to help them maintain their plans as much as possible.”

The majority of employers are ready to launch a call for tenders.

According to Isabel Boyer, plan sponsors have no choice but to invest in their group insurance. And not just because of their legal obligations, such as drug coverage in Quebec. “It’s a significant portion of employee compensation, but it’s also part of employers’ attraction and retention strategies,” she explains.

For his part, Frédéric Leblanc puts the increased spending into perspective by pointing out that more people are being treated, and more illnesses are being treated. “There’s an economic impact to all of this: populations are healthier, we live longer, and we increase productivity at work,” he underlines.

“The highly uncertain economic and geopolitical context, combined with rising costs, is leading to a certain degree of caution on the part of employers,” observes Andrée-Anne Bourgeois. Desjardins Insurance advisors are tasked with supporting employers in identifying the most appropriate plan design and cost mitigation measures. “We offer control measures to all our clients, such as adherence to contract parameters, proactive disability management, and prior authorization for medications, with the goal of ensuring the sustainability of group insurance plans,” she explains.

“The rising cost of healthcare is certainly a concern for employers,” concludes Bourgeois. According to Aon’s 2025 Global Benefits Trends Study, companies are focusing on cost control, including medical expenses, as they prepare for a period of economic uncertainty. Approximately three-quarters of them plan to negotiate with their current insurers and other vendors, and about two-thirds plan to initiate a call for tenders.