Tariffs, inflation, GLP-1s, chronic conditions reshape Canada’s employee benefits outlook
As medical costs rise and new treatments like weight-loss drugs hit the market, HR leaders should strive to understand not just what they’re paying for, but what value they’re getting in return, says one benefits expert.
Canada’s gross medical trend is projected to climb from 7.4 per cent in 2025 to 8.3 per cent in 2026, with net trend also expected to rise.
At the same time, employers are grappling with demand for GLP‑1 drugs, pressure to contain costs through wellbeing initiatives, and growing interest in flexible benefit plans, according to Aon’s 2026 Global Medical Trend Rates report.
“It is probably more important than ever that these reports come out, that these costs are documented as best we can,” says Allan Smofsky, health and benefits strategist and instructor at Centennial College, adding there are limitations to the analytics because of privacy concerns.
But employers also need to act on what the data shows, which is difficult for many HR teams, he says.
“It's one thing to document the cost, it's another thing to really think seriously about what we can do about it,” says Smofsky. “Most HR people … are not health professionals — they're not necessarily knowledgeable, they don't have the time, it's not necessarily the top of their radar.”
The problem is those who are making those decisions and have the ability to make those evaluations “base it far too much on cost and not enough on value or outcomes,” he says, often because it's difficult to get at the outcomes, whether it's a drug or some other health innovation.
Economic forces at play
The Aon 2026 Global Medical Trend Rates survey was conducted across 100+ Aon locations that broker, administer or otherwise advise on employer-sponsored medical plans. Medical trend refers to the predicted annual percentage increase in the cost of treating patients and providing healthcare services, considering factors such as inflation, service utilization, prescription drug costs, and advancements in medical technology.
While still the second lowest gross medical trend rate across the regions, North America (comprised of Canada and the United States) is one of only two regions with an anticipated gross medical trend rate higher than that predicted for 2025, at 9.3% (up 50 basis points from 8.8% in 2024) and the region with the highest year-over-year increase, says Aon.
The higher medical trend in Canada reflects broader economic forces as well as behaviour, says Isabel Boyer, vice-president at Aon.
“It's more of a feeling and intuition that we have on what's going to happen in 2026,” she says. “We see an increase in inflation everywhere in all sectors, all activities, and we think it's going to impact medical costs and benefits in general as well.”
Tariffs are one factor that may be feeding into health and dental costs over time, says Boyer, citing as an example China, which provides many of the ingredients that go into the fabrication of medication.
“When you think of all the instruments and material [such as] dentist instruments and dentist chairs and anything like that, and clutches and everything that’s fabricated in the States and then imported, that's fabricated with steel and aluminum and those materials that they're now imposing tariffs on,” she says.
There is also a lag between economic changes and costs, according to Boyer.
“With the employee benefits, whether it's medical, dental, there's always a delay with general inflation because it takes time to react to what's going on in the market,” she says. “Your chiropractor is not going to raise their fees just after an announcement — they're going to wait for next year, in January. We think everything that happened last year, we’re going to see an impact.”
Weight-loss drugs and GLP‑1s
GLP‑1 drugs are a major piece of the 2026 story, with strong employee demand and more organizations moving to add weight-loss coverage, which will lead to an increase in their cost for next year, says Boyer.
“There’s more and more pressure for plan sponsors to include them for weight-loss treatments.”
At the same time, generics that may arrive later in the year in Canada are expected to help on price, she says, both for diabetes or weight-loss use of those GLP-1 drugs.
“The demand is still there. It's still out on TikTok and everywhere,” says Boyer. “Everyone has a friend who takes it and who has lost maybe 20, 30 pounds. So, they want to do the same.”
Smofsky agrees that volumes will climb with GLP-1s.
“With generics coming in, I think it'll just drive utilization,” he says. “There's some people who hesitate not because they don't want to take the drug or they need to lose the weight, but they're reluctant to spend the money… it’s a fair size outlay.”
Seamless approach to treatment
However, he cautions there is emerging research on discontinuation and weight regain with these medications, and stresses that drugs alone are not enough for complex chronic conditions.
“If all a physician is going to do is prescribe the GLP-1 to lose the weight — whether it’s for diabetes, whether it’s obesity — what about the diet? What about the exercise? What about the mental health comorbidity?” says Smofsky, adding EAPs can be helpful here.
If we know that an individual has a chronic disease, we should try to proactively connect them with the resources that they’re already paying for, he says, adding there are privacy considerations but some insurance companies are changing the wording around consent with benefits enrolment.
Smofsky says he would like to see more seamless links between prescriptions and supportive services.
“If you're prescribed the medication, can we also prescribe the diet and exercise and stress management?” says Smofsky. “So, when they go to the pharmacy to pick up their medication, that there's a flag in the system… ‘Oh, we see that your plan covers a dietitian consult — would you like us to connect you?’”
This kind of integration could support sustainable outcomes, he says.
“If you don't manage the comorbidities, you're not managing the whole condition.”
Medical conditions driving costs
The top medical conditions expected to drive medical plan costs in 2026 are unchanged from those with the greatest impact in 2025, according to Aon:
- Cardiovascular disease remains the leading condition anticipated to drive plan costs and has been a top condition in every region.
- Cancer and tumour growth rank second, with cancer appearing in the top five in every region.
- High blood pressure and hypertension continue to contribute significantly to adverse claims experience.
- Diabetes is the fourth major condition expected to drive medical plan costs in 2026.
- Hypertension, physical inactivity, poor nutrition and obesity make up the leading risk factors behind these conditions, with obesity rising in prominence as many countries cite prescription weight-loss drugs as a key driver of higher medical trend.
Behind the higher trend line is a growing burden of chronic disease that doesn’t always show up in data, says Smofsky.
“We know, for example, that there is a lot more chronic disease in the workplace. And some of that results in absenteeism and disability — a lot of it doesn't though, and increasingly it doesn't because of medication,” he says. “There are many treatments, drugs and other, that… can treat these conditions and enable people to stay at work versus having to go off work.”
But there's a cost to that, including issues around performance and presenteeism, says Smofsky: “It's difficult to get at the value of doing that.”
Wellbeing for cost containment
Wellbeing initiatives are cited in Aon’s research as a leading cost-mitigation strategy, even when hard ROI is difficult to prove.
Boyer says that in the near term, many Canadian plan sponsors will focus on better using and promoting what they already have, instead of starting new initiatives. Plus, carriers themselves are competing on employee supports.
“All the carriers are trying to help with mental health and wellness and they're all trying to be better than the next-door carrier in that area. So, they're coming up with all those resources,” says Boyer. “There are some webinars and video capsules and readings. They have really good material there. It's just sometimes difficult to navigate through it and I think that’s what employers are going to try to do for their employees.”
Smofsky says the conversation is shifting toward “value on investment.”
“More and more, we're talking not about ROI, but about VOI,” he says.
That’s because many organizations might implement a well-being initiative and then, one or two years later, declare it successful — and often that conclusion is based on broader indicators such as engagement scores, says Smofsky.
“There's no science to it, but that is how businesses sometimes make decisions… Many well-being initiatives do not really even measure the impact of it,” he says.
“They'll look at satisfaction, they'll look at ‘Did our benefit costs go down?’ But that's definitely not a straight line. In some cases, benefit costs are going to go up because you've made your employees more aware of their health issues, of some of the resources they have.”
Higher EAP utilization, for example, can be a positive sign, says Smofsky: “Most of us now in the field accept that, within reason, that's a good thing — you want people to use these resources.
“There's some innate understanding … that if we provide these resources, if we get employees to use them, it will make them healthier. Therefore, they will be more productive and, therefore, as an organization, we will benefit.”
Changing plan design
Flexible benefit plans are highlighted in Aon’s work as an increasingly important lever for controlling medical costs.
Virtual care and digital mental health supports have become common flex features, says Boyer.
“A lot of the carriers have their own virtual care offering that you can add at a very low cost. It's often not the full, extended, Cadillac offering… It's more like a light version of it but it's cheaper,” she says.
“They're also integrating all the mental health... services and support and the virtual care with the same carrier, with the same platform.”
Moving from a traditional plan to flex is “easily doable” but requires strong communication and a suitable enrollment platform, says Boyer.
“It's more of the administration because you're going to need a platform for enrollment,” she says. “It takes a lot of communication though to your employees making them understand the benefits, how to choose which is the better fit for them… it's a project but it's easily doable.”
Smofsky says flex and health spending accounts are advertised as providing more choice, but they also provide cost savings. For example, when the cost of credits is determined in year one, the employer has the choice to increase that in year two — if they don’t, the cost of what those credits would buy has still gone up, so “that’s a way of ratcheting down cost,” he says.
Similarly, health spending accounts are a popular tool, and are very much about employer choice, says Smofsky.
“It's use it or lose it — you give the money in year one, the employee has that year and the next year to use it, otherwise it's gone.”
Beyond flex, other plan design features are gaining attention such as out-of-pocket maximums or catastrophic caps, he says, adding that chronic conditions and survivorship are also changing the landscape.
“In Canada, we have 1.6 or 1.7 million, I think it is, cancer survivors who have survived for up to 25 years. It's amazing because we used to talk about five years’ survivability.”
What that means is people can work through some of these treatments, but they may need accommodation and partial disability benefits, says Smofsky, which most disability plans don't provide for — people need to first qualify for full benefits.
“We've seen quite a bit more in the way of a basic amount of CI [critical illness coverage] that the employer provides and pays for, with employees then having the ability to top up,” he says.
“Some people call it living life insurance, but it is a way of getting financial support in the hands of individuals.”
Overall, employers are trying to figure out how to offer more to employees at a reasonable cost, says Smofsky.
“The same old, same old is not really sustainable. So, how do we do it differently and better — without breaking the bank?”
