'Continued economic slowdowns… will undoubtedly influence plan sponsor decisions,' says expert
A new report from Aon forecasts a substantial increase in Canadian employer medical costs in 2025, with projected rates rising to 7.4 percent, up from 5.0 percent in 2024.
The medical trend rate represents the percentage increases in medical plan unit costs – insured and self-insured – required to address projected price inflation, technology advances in the medical field, plan utilization patterns and cost shifting from social programs, according to Aon.
The 2025 Global Medical Trend Rates Report reflects escalating costs attributed to inflationary pressures, advanced medical technologies, and increased plan utilization.
“In 2025, we anticipate a return to more typical inflationary conditions, with the Bank of Canada projecting that inflation will be well under control,” said Joey Raheb, senior vice president and Canadian national leader for growth and client engagement for Health Solutions at Aon.
“However, our concerns are now shifting towards continued economic slowdowns, which will undoubtedly influence plan sponsor decisions.”
Raheb emphasized that while Canadian employers have yet to pull back spending significantly, they are proceeding with caution, reassessing benefit plan efficiencies, particularly in light of costly medications and chronic health conditions.
Top medical conditions driving costs
The two global regions with the highest projected medical trend rate increases versus last year are Asia-Pacific (APAC), at 11.1 percent (up 1.4 percent from 9.7 percent in 2024) and North America (comprised of Canada and the United States), at 8.8 percent (up 1.2 percent from 7.6 percent in 2024).
“It is worth noting that these were the two regions with the lowest increases from 2023 to 2024,” says the report.
The top medical conditions driving medical plan costs in Canada are:
- diabetes
- autoimmune diseases
- mental health issues
- lung disorders/respiratory
- cardiovascular and weight management.
The report underscores that weight-loss drugs, such as GLP-1 medications, are projected to add 1.2 percent to Canada’s overall medical cost trend in 2025.
“New in 2025, obesity has emerged as a top five global risk factor expected to drive future claims, replacing bad nutrition, driven by its prevalence in the U.S., Canada and [Latin America and the Caribbean],” says the report.
“This is particularly important this year, as many countries cite prescription drugs used for weight loss as leading factors in the increase in medical trend.”
Rising medical costs and flexibility
Kathryn Davis, vice president of global benefits at Aon, commented on the broader implications of these rising costs for both employers and employees.
“Despite inflation projected to decrease in 2025, we expect health and wellbeing costs will continue to rise. As a result, medical plans are an important concern for companies, especially those with a global footprint,” she said, highlighting the unexpected budget pressures these increases place on employers and the challenge of affordability.
Flexible benefit plans are increasingly used to mitigate medical costs at a global level, says the Aon report, with roughly 60 percent of countries expected to use this initiative in 2025 — and it is now the top mitigation factor in Canada.
The report draws from data collected across 112 countries, reflecting Aon’s insights based on interactions with clients and carriers managing employer-sponsored medical plans.
