‘There will be a renewed focus on physical health, which may initially push claims higher as individuals become more proactive and self‑aware about their well‑being’
Medical plan costs are poised to give HR professionals and employers some challeges this year, according to a recent report.
That’s because Canadian employers are facing an 8.3% rise in medical plan costs in 2026, up from 7.4% in 2025, Aon reports in its 2026 Global Medical Trend Rates Report. The forecast compares with an average global increase of 9.8%.
The medical trend rate is the percentage increase in per‑person medical plan costs—both insured and self‑insured—needed “to account for expected price inflation, advances in medical technology, changes in how people use healthcare services and cost shifting from government programs,” Aon states.
“As employer‑sponsored medical plans continue to represent a significant portion of overall rewards investment, the need for effective cost management has never been greater,” said Kathryn Davis, vice‑president, Global Benefits at Aon.
Mercer Marsh Benefits (MMB) also previously reported about incoming medical plan cost increases for employers.
Impact of tariffs on medical costs
Aon links Canada’s 2026 healthcare trend forecast of 8.3% to “several converging dynamics,” including U.S. trade policy and developments in the pharmaceutical market.
According to Isabel Boyer, vice‑president for Health Solutions in Canada at Aon, the 2025 U.S. tariffs on imports from Canada and other countries are “driving up costs and adding friction within the integrated North American and global pharmaceutical supply chain.” She said Aon believes “these tariffs are increasing procurement costs for certain drugs in Canada and heightening the risk of shortages.”
At the same time, Aon reports that “the introduction of generics for weight‑loss medications (GLP‑1s) in 2026 will help offset the cost impact of expanding coverage for these drugs.” For HR leaders, changes in the GLP‑1 market may influence drug plan strategy, including coverage decisions for obesity and diabetes treatments.
Many Canadian businesses have been hurting due to the tariffs, with some saying they would not survive if the situation does not get better, according to a previous report.
Conditions driving Canadian medical plan costs
The Aon report identifies five leading medical conditions expected to drive Canadian employer medical plan costs in 2026:
- Autoimmune diseases (excluding diabetes)
- Diabetes and obesity
- Musculoskeletal and back disorders
- Mental health conditions
- Respiratory and lung disorders
Aon notes that mental health “remains a concern,” but the study indicates “there will be a renewed focus on physical health, which may initially push claims higher as individuals become more proactive and self‑aware about their well‑being.” For HR professionals, this mix of physical and mental health pressures underscores the need for integrated wellbeing, disability management and absence strategies.
Access issues in the healthcare system are also affecting claims. “As seen over the past few years, physician shortages have delayed preventive screenings, increasing the risk of more serious conditions and driving claims higher,” Boyer said. She added that without “meaningful improvements in access to primary care and early intervention, organizations should expect continued pressure on both the frequency and severity of health claims over the next few years.”
Cost mitigation measures
Aon’s Canadian findings show employers preparing a range of responses to rising health costs. The top mitigation initiatives anticipated by plan sponsors for 2026 are:
- Use of cost‑containment features in plan design
- Promotion of wellness initiatives
- Adoption of alternative funding vehicles and financial strategies
- Implementation of flexible benefit plans to control benefit costs
- Benefit reductions and curtailments
Boyer said continued pressure from carriers on administration and pooling fees will also influence overall costs. “Plan sponsors are also likely to focus on strengthening existing wellness programs and partnerships rather than introducing new services, leveraging data to monitor health risk indicators and more effectively target their resources,” she said. For HR, these measures highlight the importance of data‑driven plan management and careful communication around any changes that affect employees.
Many Canadian employers are reworking their benefits offerings in response to escalating healthcare and dental costs, according to a previous survey.
“We’re seeing more plans transitioning to cover 80% coinsurance instead of 100% for health benefits, particularly for paramedical practitioners like massage therapists and chiropractors. In some cases, this change is aimed at managing costs, while in others, it’s about redirecting funds to support more flexible benefit options, such as an HSA,” said Kasey Boisselle, Senior Vice President at Gallagher.
