Why Premiums Are Soaring
Employers are seeing group health plan costs climb faster than almost any other business expense. Prescription drug prices have skyrocketed, particularly for biologics and specialty drugs that can cost tens of thousands of dollars per patient each year. Hospitals and outpatient treatments are charging more as they face staffing shortages and higher operating costs. Mental health resources and virtual healthcare – services employees are demanding more of – add another layer of cost pressure.
According to recent reports, Canadian employers are bracing for health benefit cost increases of 7–10% in 2025. That figure is more than double the pace of average wage growth, creating an imbalance that is forcing businesses to rethink how they manage employee benefits.
The Real Impact on Businesses
For many employers, rising premiums aren’t just numbers on a budget line – they shape hiring decisions, culture, and retention. When costs rise, the temptation may be to trim coverage, shift more of the burden onto employees, or hold off on enhancements. But there’s a catch. Benefits are often as important as salary when candidates weigh job offers. Cutting back may save money in the short term but can cost far more if turnover rises or top talent chooses competitors who offer richer plans.
Small and mid-sized employers are especially vulnerable. Without the buying power of large corporations, they feel the squeeze more acutely. Some face the tough choice of scaling back coverage or paying significantly higher premiums to keep employees satisfied.
Smart Ways to Manage Rising Costs
Employers aren’t powerless in this situation. Some of the most effective strategies include:
- Rethinking plan design. Flexible benefits, Health Spending Accounts (HSAs), and Wellness Spending Accounts give employees choice while letting employers set predictable budgets.
- Promoting preventive care. Investing in wellness initiatives, mental health programs, and virtual care can reduce long-term claims by keeping employees healthier and more engaged.
- Leveraging data. Analyzing usage trends can reveal what employees actually value, and where money might be wasted on under-utilized coverage.
Working with a broker helps employers compare options, negotiate better rates, and identify plan changes that balance cost control with employee satisfaction.
Why Fall Is the Time to Act
Fall is traditionally open enrolment season, making it the best time to review your benefits plan. By assessing coverage now, employers can adjust budgets, negotiate renewals, and communicate changes clearly before the new year. Waiting until renewal notices arrive often means scrambling to make decisions without enough time to properly evaluate options.
Open enrolment is also a valuable communication opportunity. Explaining how premiums are changing – and what steps the company is taking to keep plans competitive – builds trust with employees and helps them make informed choices.
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Rising healthcare costs aren’t going away anytime soon. Employers who approach the challenge strategically can continue to offer benefits that attract and retain top talent without breaking the bank. The key is balancing cost control with employee value – and now is the perfect time to start that conversation.
Want to explore cost-effective strategies for your group benefits plan? Talk to us today to find the right balance between protection, affordability, and employee satisfaction.
