Benefits inflation has forced plan sponsors into difficult conversations. Prescription drug costs continue to rise, mental health utilization has increased, and employees expect broader, more personalized coverage than they did even a few years ago. Aon’s 2026 Global Medical Trend Rates report projects a Canadian medical trend rate of 8.3 per cent this year, up from 7.4 per cent in 2025, which is roughly four times the rate of general inflation.
The instinctive response is often to ask where costs can be reduced. According to Sylvia Tran, Associate Vice-President, Group Benefits, Eastern Sales at Co-operators, that’s usually the wrong place to start.
Instead, employers should first ask whether their benefits plan is delivering value for both the organization and its employees, because reducing expenses and reducing value are rarely the same thing.
“When cost becomes the only question, employers risk building a smaller plan—not a smarter one,” Tran says. “The question I would rather start with is whether the plan is still doing what the employer built it to do. Sometimes the answer is that it’s doing more than they realize, and sometimes it’s doing less. Either way, you can’t manage the cost until you know that.”
The challenge plan sponsors face today is finding ways to keep benefits sustainable while continuing to support attraction, retention and employee wellbeing.
That often means looking beyond across-the-board reductions and instead evaluating whether the plan still reflects how employees actually use it.
Utilization is rarely distributed evenly. Canadian drug plan data reported by Telus Health in 2026 shows inflammatory conditions accounting for roughly a fifth of eligible drug spend, with diabetes and mental health making up much of the remainder. A uniform reduction applied across every line of a plan takes value out of coverage that was never driving the increase, while leaving the actual pressure largely intact.
Tran says, “A flexible design lets the same dollar mean something different to a 26-year-old and a 56-year-old. People don’t always think of that as a cost decision, but it behaves like one, because you stop paying for coverage nobody is claiming against.”
Co-operators has increasingly focused on flexible plan designs that allow organizations to tailor benefits to the needs of a diverse workforce rather than relying on a one-size-fits-all approach. Flexible benefits, expanded mental health support and inclusive coverage are examples of ways employers can direct dollars toward the benefits employees value most while improving the overall efficiency of their spend.
When budgets tighten, it can be tempting to focus on the upcoming renewal rather than the longer-term health of the plan. Tran believes that’s where organizations can get themselves into trouble. Instead, employers should periodically step back and assess whether the overall strategy still aligns with their workforce.
Benefits decisions shouldn’t be made in isolation or simply in response to a single year’s claims experience. Every change has downstream effects on recruitment, retention, employee engagement and future plan utilization.
Tran doesn’t believe benefits decisions should be driven by a single renewal or a year’s worth of claims experience. The better approach, she says, is to build decisions around evidence.
“You need historical data to make evidence-based decisions,” she says. “Benchmarking is always important when you’re making sure that your benefits plan is competitive.”
For Tran, that review shouldn’t be a one-off exercise. She recommends a deeper assessment every three to five years, while recognizing that plans should continue to adapt as new data emerges.
Data also helps answer one of the biggest questions employers wrestle with: How many people will this actually affect?
Tran says hesitation tends to come from the same place, regardless of whether an employer is considering reducing coverage or introducing something new.
“Employers worry one decision will affect everyone,” she says. “That’s exactly why data matters. It shows who is truly impacted, how significant the impact is, and gives employers the confidence to make the right call.”
In her experience, that concern often exceeds what the claims data actually shows. Employers may assume a proposed change will have widespread consequences, but utilization data frequently reveals that the number of employees directly affected is much smaller.
The same uncertainty can arise when employers consider expanding benefits. Whether it’s enhancing mental health coverage, introducing family-building benefits or moving to a more flexible plan design, organizations can become hesitant because they’re unsure how much employees will use the new offering or whether it’s sustainable over the long term.
That’s where Tran believes advisors and carriers add value. “Our job, in the role of the carrier and the advisor, is to help employers separate perception from reality,” she says. “If you can say that this change is going to affect the one per cent rather than the 99, that really helps figure out what is perception and what is reality.”
Even well-supported decisions can fall flat if employees don’t understand why they’re happening. Communication should begin, Tran says before any change takes effect, whether that’s through meetings, written updates or other employee communications that explain both the decision and the rationale behind it.
“Just having data and actually talking about the change prior to it being implemented,” she says, “and then obviously having some sort of a resource that they can reach out to if they are affected by the change or if they have any questions after the change would be very helpful.”
The message itself is only part of the equation. Employees also need somewhere to turn once the announcement has been made, whether that’s an advisor, HR team or another point of contact that can answer questions and provide reassurance.
Cost pressure isn’t going away, and no plan design will make it disappear. What can change is how employers respond. Decisions grounded in evidence, supported by clear communication and revisited as circumstances shift are more likely to deliver value for both the organization and its employees.
