Only 55% of Canadian employers feel successful in containing healthcare costs, finds survey

Canadian employers are reworking their benefits offerings in response to escalating healthcare and dental costs, according to a 2025 survey of 546 organizations across the country.

While medical benefits remain a cornerstone of competitive compensation, companies are increasingly challenged to offer flexible, affordable plans that address both traditional and emerging needs, finds Gallagher.

Employers are expanding mental health coverage and improving access to specialized practitioners, says its report, even as they grapple with the rising costs of prescription drugs—especially specialty medications, GLP-1s for obesity, and lifestyle drugs.

Managing these costs has become more complex, with 55% of employers citing specialty drugs as their top concern and 48% pointing to non-specialty prescriptions.

Only 55% feel successful in containing healthcare costs, while 40% remain neutral, highlighting ongoing difficulties, says the Gallagher report Benefits Benchmarks.

Cost-sharing and plan design trends

To manage expenses, organizations are adopting cost-sharing models such as coinsurance and combined annual maximums. There’s a notable shift from 100% to 80% coinsurance, particularly for paramedical services like massage therapy and chiropractic care.

In 2025, 37% of employers set coinsurance at 80% or 85%, up 5 points from last year, while 50% still cover the full amount—down 4 points. Small employers are more likely to use a 50-50 cost split (52%) than large employers (21%).

“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

Combined annual maximums are becoming more popular, allowing employees to use a single pool of funds for various paramedical services. Over a third (35%) of employers use this approach, rising to 40% among large organizations.

The most common maximum is $500–$749 (24%), but 20% of employers now set it at $2,000 or more—a seven-point increase from 2024. Individual maximums for each practitioner remain the norm for 65% of employers, helping control costs for high-use services like massage therapy.

Mental health and health spending accounts

Mental health benefits are receiving more attention, but coverage often remains limited, finds Gallagher. Thirty-five percent of plans cap mental health coverage at $500–$749 annually, which may not meet typical therapy costs. More plans are now setting separate annual maximums for mental health.

Coverage for mental health practitioners is expanding: 56% of employers now include clinical counsellors, up six points from last year. Specialized roles like psychoanalysts (32%), marriage counselors (28%), and registered psychiatric nurses (13%) are also being added to broaden access.

Health spending accounts (HSAs) are another tool for flexibility, with 48% of Canadian employers offering them, finds Gallagher. Most (74%) rely on their core health and dental provider to administer the HSA.

The most common HSA credit amount is $500–$749 per year (26%), and small employers are more likely to offer $1,000–$1,499 than large firms.

Prescription drug management and cost controls

Employers are increasingly using prior authorization for high-cost drugs: 35% require it in 2025, up from 28% last year. This jump is especially notable among small employers, where adoption more than doubled. Step therapy is less common, used by only 9% of employers, but remains a tool for guiding employees to lower-cost alternatives first.

Coinsurance remains a popular cost-sharing method, with 40% of employers offering 80% or 85% coverage for prescription drugs. Dispensing fee limits are less common than before (32% in 2025, down from 38%), and per-prescription deductibles are also declining (23% in 2025, down from 27%), finds Gallagher.

“One of the clear trends we’re noticing with stop-loss insurance is the steady rise in threshold limits. What used to be $7,500 or $10,000 is now more often $15,000 for small and midsize groups and $20,000 to $25,000 for large ones. Employers are adjusting their attachment points to help manage rising costs — essentially taking on more risk to keep premiums stable,” said Boisselle in the report.

“For employers frustrated by increased pooling charges, annual drug maximums are being implemented, particularly in provinces where pharmacare programs are in place.”

To limit exposure to high-cost claims, 27% of employers have set annual drug plan maximums, while 7% have lifetime maximums. Still, most plans (57%) offer unlimited coverage, though large employers are increasingly reevaluating their approach as costs rise, says Gallagher.

Stop-loss insurance thresholds are also increasing, with attachment points now commonly at $15,000 for small/midsize groups and $20,000–$25,000 for large employers.

Dental benefits: balancing coverage and costs

Dental inflation continues to outpace wage growth, with fee guide increases ranging from 2% to 4% across provinces and cumulative rises of 15%–20% since 2022, says the report. Despite these pressures, 97% of employers continue to offer dental coverage, and 82% of plans have no deductible. Most organizations are making incremental changes—such as adjusting coinsurance levels or using previous-year fee guides—to manage costs.

Combined annual dental maximums are slightly less common than last year (67% in 2025 vs. 69% in 2024), says Gallagher, with the most frequent maximum in the $1,500–$1,999 range (32%). Fewer employers now offer $2,500 or more as a maximum, reflecting a shift toward more conservative plan designs.

Orthodontic coverage remains uneven: 59% of employers cover dependent children, but only 41% extend this to adults. Lifetime maximums for orthodontia typically fall between $2,000 and $2,499 (31%).

A growing number of employers (36%) now cover 100% of basic and preventive dental care, up three points from last year, says the report. For major dental work, such as crowns and bridges, most employers (54%) offer lower coinsurance (around 50%–55%), and 15% do not cover major care at all—a practice more common among small employers.

The number of Canadians who have access to employer-provided medical or dental benefits has been growing slightly over the past few years, according to a report from Statistics Canada (StatCan).