A renewal increase is the provider’s repricing of your plan based on claims experience, drug cost trends, disability claims, workforce changes, plan maturity, and the insurer’s broader pricing assumptions. If your group benefits renewal came in higher than expected, that number may still be negotiable or manageable, and you have more options to reduce an employee benefits renewal increase than you realize.
The first step is to understand what is driving the increase and review the renewal details before making changes. From there, you can adjust plan design and other cost-control measures, compare the available strategies based on potential savings and employee impact, and choose the approach that fits your organization. These steps are part of managing your employee benefits plan and its costs, alongside ongoing claims monitoring and plan performance reviews over time
Editorial note: The specific levers available to you, and how much room there actually is to negotiate, depend on your funding arrangement, provider, province, and group size. Treat the strategies below as a starting point for a conversation with your broker rather than a guaranteed outcome for your plan.
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What Drives a Group Benefits Renewal Increase in Canada?
Your renewal increase is driven by a combination of claims experience, drug costs, disability claims, workforce changes and plan maturity, and the insurer’s broader trend and pricing assumptions.
Before deciding how to reduce the increase, it is important to understand which of these factors are affecting your plan and how much each one may be contributing to the renewal:
Claims Experience: Key Factor in Many Renewals
Your own claims history is typically an important factor in renewal pricing, particularly when your plan is large enough for its claims experience to have greater influence on pricing.
Insurers generally use past claims experience, along with other plan and market factors, to estimate future costs. If claims were higher than expected, the renewal may reflect the insurer’s expectation of higher future claims costs.
Not all claims patterns are the same, and the distinction matters because the appropriate response can be different for each. Two patterns to watch for are broad-based utilization increases and high-cost claim concentration:
- Broad-based utilization increases: claims are up across the plan. This can stem from a range of factors: workforce demographics, plan design, benefit awareness, provider behaviour, or broader utilization trends.
- High-cost claimant concentration: one or two employees with expensive claims are distorting the entire plan’s experience.
Drug Cost Trends: A Major Source of Renewal Pressure
Drug claims can put significant upward pressure on group benefit plan costs, particularly when high-cost or specialty drugs account for a growing share of spending. According to Medavie Blue Cross, per-capita drug spending across its book of business rose 4.0% in 2025, reaching $1,656, up from $1,592 in 2024. (Source)
Even so, this pace of growth was actually the slowest pace of growth in recent years, but the underlying mix of drug spending remains important for plan sponsors. Specialty drugs, for example, can account for a relatively small share of claims while representing a much larger share of total drug spending.
Three forces can contribute to drug-cost increases: price inflation on existing drugs, new high-cost drugs entering the market, and rising utilization.
Disability Claims: The Hidden Renewal Driver
Employers often focus on health and dental when reviewing a renewal, but disability claims, particularly long-term disability, can also contribute to a renewal increase, particularly for mid-size and large groups, though the effect of an individual claim depends heavily on how that benefit is funded and rated. In 2024, CLHIA reports that Canadian insurers paid out roughly $10 billion in disability benefits, including $8 billion for long-term disability and $2 billion for short-term disability. (Source)
That said, the effect of disability claims on renewal pricing depends on the plan’s funding and pooling arrangements, as well as how the insurer treats individual claims in its renewal calculation. A long-duration LTD claim can, therefore, be important to review when an employer receives a significant renewal increase.
Workforce Changes and Plan Maturity: Drivers of Renewal Costs
An aging workforce, a shift in family composition, or a change in headcount can all affect renewal pricing alongside claims experience and other underwriting factors. Specifically, a workforce with a high proportion of families may have higher overall utilization simply because more dependants are covered, though the exact effect will depend on the plan, benefit mix, and claims experience.
Plan maturation also plays a role. A newer plan may see rising utilization simply because employees are becoming aware of and using benefits they did not initially access. This is normal and expected, but it still shows up in the renewal as higher claims activity. Newer plans in particular can see shifting utilization patterns as employees grow more familiar with their coverage, though how long this takes and how much it affects your numbers varies from plan to plan. If your renewal increase seems high relative to your plan’s age, it’s worth asking your broker whether plan maturity or limited claims credibility played a role in the calculation.
Insurer Trends and Pricing: Factors Beyond Claims Experience
Beyond your plan’s own data, insurers may apply trend factors and other pricing assumptions based on expected changes in healthcare costs, utilization, their broader experience, and other factors used in their pricing model. These factors are not always visible on the renewal statement, and the assumptions can differ between insurers.
Overall, ask your benefits advisor or insurer to explain how much of the renewal increase comes from your plan’s claims experience and how much comes from trend, pricing, or other adjustments. This is the first step toward determining what is driving the increase and preparing for the next steps.
How to Review Your Benefits Renewal Before Making Changes
Before you negotiate, review the renewal breakdown for loss ratios by benefit category, pooling and high-cost claims, and rate guarantee terms and plan data that can affect your negotiation leverage. A structured review helps you determine which parts of the renewal actually need to change before any negotiation begins.
Review the loss ratio by benefit category
Initially, you need to review the loss ratio by category. The target loss ratio is the percentage of premiums the insurer expects to pay back in claims, and it’s specific to your plan rather than a fixed industry number.
If your health loss ratio is 65% but dental is at 110%, the problem is concentrated in a single category, and the solution should be concentrated there too. A blended increase across all categories may be hiding a single-category problem that could be addressed with a targeted plan design change rather than a broad premium increase.
Review pooling and high-cost claims
Next, review whether your pooling threshold is appropriate for your group size.
Depending on the arrangement, health or drug claims above a specified threshold may be removed from your group’s claims experience and funded separately through a pool. The threshold and pooling charges vary by provider, plan, group size, and pooling arrangement. Confirm the threshold, which claims are eligible, the pooling charge, and how it’s treated at renewal for your specific plan.
Rather than assuming that a higher or lower threshold is automatically better, you should ask your broker how the current threshold affects both your claims experience and pooling charges. A change may reduce one cost while increasing another, so the objective here is to understand the trade-off rather than simply lower the threshold.
Review the rate guarantee and plan data
You have to confirm that the rate guarantee period and its terms match your plan’s stability. Confirm the rate guarantee period directly in your contract or renewal proposal rather than assuming a standard term, as guarantee periods vary by provider, benefit, and arrangement. Larger or more stable groups may have access to different guarantee arrangements, but you should not assume that an 18- or 24-month guarantee will be available simply because the group is larger or has stable claims.
Finally, verify the demographic data the provider used, as incorrect ages, missing terminations, employees who left mid-year but were never reported, or wrong dependent counts can affect the renewal calculation. Provider forms and plan administration processes specifically require updates such as terminations, earnings changes, and new plan members, so the accuracy of this information matters when reviewing a renewal.
To sum up, the following table summarizes the key review items, what to look for, and what each finding means for your negotiation position:
| What to Check | What to Look For | Negotiation Leverage |
|---|---|---|
| Loss ratio by category | One category has significantly higher claims experience than the others | Isolate the problem and consider a targeted change rather than accepting a blended increase across all categories |
| Pooling arrangement and threshold | High-cost claims, changes in pooling charges, or a threshold that may not fit the group’s current experience | Ask whether the pooling arrangement can be adjusted and what the cost trade-off would be |
| Rate guarantee | Short guarantee period or terms that provide limited budget certainty | Ask whether a longer guarantee or alternative rate arrangement is available |
| Census and plan data | Outdated ages, missing terminations, incorrect salaries, dependent counts, or coverage levels | Correct data errors before rates are finalized |
How to Adjust Plan Design to Reduce an Employee Benefits Renewal Increase
Targeted plan design changes, including deductible adjustments and coinsurance adjustments, benefit maximums and caps, HSA funding, and changes to plan structure or cost-sharing arrangements, can help reduce the cost of a group benefits plan while preserving the coverage employees use. The goal is not to strip the plan down but to realign how costs flow through it so the employer pays less in premium without employees losing access to the benefits they value most.
The Four Plan Design Approaches
The following table compares four of the most common plan design adjustments available to Canadian employers at renewal:
| Approach | How It Can Reduce or Manage Cost | What Employees Keep |
|---|---|---|
| Adjust cost-sharing | Shifts part of eligible claim costs to the plan member through deductibles or coinsurance | Access to the same covered benefit, subject to the revised cost-sharing terms |
| Adjust benefit maximums and caps | Limits the plan’s exposure in selected benefit categories without removing the benefit entirely | Access to the benefit, subject to the revised maximum or limit |
| Move selected expenses to an HSA | Changes how selected expenses are funded by replacing some insured coverage with a defined employer-funded account | A defined amount that can be used for eligible expenses covered by the HSA |
| Change the plan structure or contribution arrangement | Uses plan tiers or changes the employer-employee premium split to manage employer cost | Depending on the design, employees may retain the existing coverage or have a choice between plan options |
The right approach depends on what is driving the renewal increase and how much change the employer is prepared to make. In practice, employers may use one or a combination of these approaches rather than relying on a single change to address the full renewal increase.
Adjust Cost-Sharing Through Deductibles or Coinsurance
Cost-sharing is one of the most direct ways to change how much the plan pays toward eligible claims. Two common levers are coinsurance and deductibles.
Introduce or Adjust Coinsurance on Targeted Categories
Adjusting coinsurance on specific benefit categories reduces the plan’s reimbursement per claim and shifts part of the cost to the employee. The most common categories for coinsurance adjustments are paramedical services (massage therapy, physiotherapy, naturopathy), vision care, and dental services beyond basic preventive care.
That said, the potential premium effect depends on utilization, the category being changed, the existing plan design, and the insurer’s pricing. So you do not assume that a specific coinsurance change will produce a fixed level of savings:
See the table below for coinsurance adjustment scenarios and their trade-offs. These figures illustrate general patterns rather than a Canadian benchmark; actual savings depend on your plan’s utilization and your insurer’s pricing.
| Change | Expected Premium Impact | Employee Experience | Best Fit |
|---|---|---|---|
| 100% -> 90% on paramedical | Modest savings; minimal utilization change | Barely noticeable for most employees | Groups wanting a symbolic cost-sharing signal without major disruption |
| 100% -> 80% on paramedical | Potential for meaningful savings, though the exact figure depends on your plan | Member pays 20% of the eligible claim amount, subject to plan limits and reasonable-and-customary rules | A common adjustment that aims to balance savings with employee acceptance |
| 100% -> 80% on dental (basic + major) | Significant savings; high-volume category | Employees see cost-sharing on routine cleanings and fillings | Groups with above-average dental utilization driving renewals |
| 80% -> 70% on any category | Incremental savings | Employees who already cost-share may resist a second reduction | Only recommended if combined with an offsetting HSA or benefit enhancement |
Employee perception matters. Employees experience coinsurance increases as a takeaway, even when the overall plan remains competitive. If your organization is in a tight labour market, or if employees recently absorbed other compensation changes, the timing and communication of coinsurance adjustments matter as much as the dollar amount.
Ask your broker to model the premium impact of specific coinsurance changes by category so you can prioritize adjustments that produce meaningful savings with the least employee friction.
Add or Increase Deductibles
Adding a deductible to a plan that currently has none, or increasing an existing one, shifts the first portion of eligible expenses to the employee. This can reduce the amount reimbursed by the plan, particularly for smaller claims.
Deductibles should be modelled rather than treated as a guaranteed premium reduction. The effect depends on the benefit category, current utilization, plan design and insurer pricing.
The table below shows sample deductible levels to discuss with your broker as a starting point for modelling. These are illustrative starting points rather than fixed tiers tied to group size, so treat the “best suited for” column as a discussion prompt rather than a rule:
| Deductible Level | Best Suited For | Key Consideration |
|---|---|---|
| 25permember/year | Groupsintroducingadeductibleforthefirsttime | Lowemployeefriction;modestpremiumreduction;establishescost-sharingprinciple |
| 50 per member/year | Groups looking for a more noticeable offset to renewal increases | Noticeable premium savings; manageable out-of-pocket impact for most employees |
| $100 per member/year | Plans with a richer current design and higher utilization, where a larger deductible has more room to move pricing | Significant savings; requires strong communication; consider pairing with an HSA offset |
Larger organizations tend to benefit from more stable rates because risk is distributed across a wider pool, while smaller businesses may see sharper premium increases following a year with high claims, since a single costly event has a proportionally larger impact on the group’s overall risk profile. But it is worth noting that the effect of a deductible depends on your plan’s rating method, current utilization, and existing design rather than group size alone.
Ask your broker to model the premium reduction for two or three deductible levels on your health and dental categories, and compare the premium savings against the total out-of-pocket cost shift to employees.
Adjust Annual Maximums and Per-Visit Caps
Coverage caps on specific benefit categories are one of the simplest plan design levers. Adjusting annual maximums on categories like massage therapy, physiotherapy, or vision care changes the plan’s maximum exposure per employee per year without eliminating the benefit.
This lever is most useful when your claims data shows high utilization in a specific category or a smaller number of employees driving a disproportionate share of the category’s claims.
For example, if many employees use substantially less than the current maximum, a lower maximum may retain coverage for typical use while reducing the plan’s maximum exposure. The appropriate level should be based on your own utilization data rather than a generic industry target.
Before adjusting any cap, ask your broker for:
- A utilization distribution report for each paramedical category, showing what percentage of employees claim at each dollar level. This reveals where the natural breakpoints are before you choose a new cap.
- A per-category cost breakdown so you can see which maximums are actually generating meaningful insurer exposure versus which are largely symbolic.
Ask your broker to model the premium impact of reducing the maximums in the categories with the highest utilization, and compare the projected savings with how many employees would be affected.
A Critical Exception: Mental Health Coverage: Mental health benefits require more careful consideration before applying the same cost-control approach. If your plan currently has a relatively low psychologist or counsellor maximum, review the actual utilization and employee impact before reducing it further. A lower maximum may reduce premiums, but it can also leave employees with less support and limit employees’ access to care. Therefore, you need to ask your broker or insurer to model the premium savings and weigh them against the reduction in coverage.
Shift Predictable Categories to a Health Spending Account
One structural option is removing predictable, lower-risk benefit categories from the insured plan and covering them through a Health Spending Account (HSA) instead.
When categories such as vision, paramedical services, or portions of dental care are moved to an HSA, the employer changes how those expenses are funded rather than simply reducing the reimbursement level under the insured plan.
When this approach makes sense:
- Your renewal data shows steady, predictable utilization in categories such as massage therapy, vision, or basic dental.
- You want to give employees broader spending flexibility than traditional group insurance, where the plan covers a percentage of specific types of expenses; an HSA set up as a Private Health Services Plan gives employees a fixed dollar credit to use on eligible medical and dental expenses under CRA rules. (Source)
- You want to consider a hybrid model, combining a leaner insured group plan with an HSA allocation.
The trade-off is that HSA coverage has a fixed dollar limit rather than percentage-based reimbursement. Employees with high utilization in the categories moved to the HSA may exhaust their allocation before year-end. You can manage this by setting the allocation at a level that covers average utilization.
Ask your broker to model the premium reduction from removing specific benefit categories from the insured plan, compared against the cost of funding an equivalent HSA allocation.
Change the Plan Structure or Premium Contribution
Some employers may prefer to change the structure of the plan rather than apply the same cost-sharing change to every employee.
One option is to add a higher-deductible tier, offering employees a choice between a standard plan and a lower-cost option with a higher deductible. This can provide employees with some flexibility to choose the level of coverage that matches their expected usage, provided the employer continues to offer the standard tier.
Another option is to shift the employer-employee contribution ratio. This does not reduce the total premium charged by the insurer. Instead, it changes the percentage of the premium paid by the employer versus the employee.
This distinction matters when reviewing the renewal:
- Plan design changes can change the amount the plan reimburses or the plan’s exposure to claims.
- A higher-deductible tier changes the structure by giving employees a choice between options.
- A contribution change reduces the employer’s share of the premium but does not reduce the insurer’s total premium.
If the objective is specifically to lower the renewal premium, focus first on changes that affect the plan’s insured benefits or claims exposure. If the objective is to reduce the employer’s total benefits spending, contribution changes may also be relevant.
Ask your broker to model the available plan structures and contribution arrangements separately. Compare the effect on the insurer’s premium, the employer’s total benefits spending, employee out-of-pocket costs, and administrative requirements.
How to Choose the Right Strategy to Reduce Your Renewal Increase
By this point, you have identified what is driving your renewal increase, reviewed the renewal breakdown, and considered the plan design levers available to you. The question now is which of those levers to pull, and in what order.
The answer depends on three things: the cause of the increase, the effect on employees, and whether your team can realistically execute the change.
Start With the Cause, Not the Cost
A common mistake at renewal is starting with “how do we cut costs” rather than “what is actually causing this increase.” Those two questions lead to very different decisions.
If the renewal is driven by a single high-cost drug claimant, pooling, drug management, or claims-management options may be more appropriate than a full plan redesign.
If the renewal is driven by broad-based utilization increases across the plan, plan design changes such as coinsurance, deductibles, or category maximums may be warranted.
If the increase reflects the provider’s pricing assumptions, trend factors, or other renewal adjustments, negotiation with the provider may be the primary lever. Matching the response to the cause is one of the most important steps in making a sound renewal decision.
Not Every Dollar Saved Is Worth the Trade-Off
The lowest-cost option is not always the best option. Cutting benefits reduces premiums but can also increase employee out-of-pocket costs, reduce the perceived value of the plan, or affect hiring and retention.
Similarly, switching providers for a lower first-year rate may produce a worse outcome at the second renewal. Maintaining the status quo avoids disruption but may not be financially sustainable. The decision is not “what saves the most money,” but “what produces the most appropriate balance of cost, employee experience, and long-term sustainability?”
With that in mind, it helps to compare the available options based on how much they can reduce the renewal increase and what employees or the employer may give up in return.
Some options can reduce costs with minimal disruption to employees, such as pooling adjustments, drug-management strategies, and negotiation of renewal assumptions. Other options can reduce premiums but create more friction: higher coinsurance, new or higher deductibles, coverage reductions, and provider changes can affect how employees use and perceive their benefits.
The important point here is to understand the trade-off before choosing the option with the largest immediate premium reduction.
Be Honest About What Your Team Can Handle
The best option on paper can become the wrong option in practice if your team cannot manage it effectively.
ASO funding may provide greater control over how benefits costs are funded, but it requires more employer involvement in claims variability and cash-flow management. Regular claims monitoring can improve the information you have going into renewal, but only where suitable reporting is available, and it still requires broker commitment and quarterly review meetings to be effective.
Flexible benefit plans offer employee choice but add administrative complexity and communication requirements. If your HR team is already stretched, choosing a simpler option that you can execute well will produce better results than a complex option that is implemented poorly.
The table below maps the main cost-control strategies discussed in this article against the three decision factors that matter most:
| Option Category | Potential Cost Impact | Employee Impact and Complexity |
|---|---|---|
| Negotiation and renewal assumption review | Depends on the provider’s pricing and the specific renewal components that can be challenged or negotiated | Low direct employee impact; generally lower implementation complexity |
| Pooling and high-cost claim management | Depends on the group’s claims experience, pooling arrangement, and provider pricing | Low direct employee impact; moderate broker involvement |
| Drug management | Depends on current drug spending, utilization, plan design, and the strategies available under the plan | Low to moderate employee impact; moderate implementation complexity |
| Plan design changes | Depends on the categories and cost-sharing changes selected | Moderate employee impact; moderate implementation complexity |
| HSA or hybrid funding | Depends on the insured benefits replaced, HSA allocation, claims experience, and funding arrangement | Can preserve flexibility but changes how expenses are funded; higher employer involvement. |
Use the table as a comparison framework rather than a ranking of which strategy is best. The appropriate option depends on the cost driver identified in your renewal review.
How to Manage Your Plan Between Renewals to Reduce Future Increases
Monthly claims monitoring and quarterly broker reviews can turn the annual renewal process into a more predictable, data-informed process. Where suitable claims reporting is available, more frequent monitoring can help you and your broker identify cost drivers earlier and arrive at renewal with better information.
Monthly Claims Monitoring
A monthly claims dashboard tracks the metrics that can influence your next renewal, including drug claims by category and high-cost claimant trends, disability claims by type and duration, dental utilization patterns, and per-employee-per-month (PEPM) costs compared with your budget and previous periods. How much detail you actually see depends on your group size, funding arrangement, and your provider’s privacy practices. Most reporting is built around aggregated or de-identified claims trends rather than information tied to a specific employee.
The goal is not to monitor every metric equally, but to identify changes early enough to investigate them. Monthly monitoring is valuable because it creates a window for mid-year action. Without it, problems can accumulate unseen for 12 months and appear as a renewal increase that is difficult to address because the claims have already occurred. With monthly data, you and your employee benefits broker can identify emerging problems while there is still time to review plan design, claims management, or other cost-control options.
The following red flags should trigger mid-year review and potential action:
- A high-cost drug claimant or rapidly increasing drug claim warrants a review of the plan’s pooling, drug-management, and claims-management arrangements.
- Several consecutive months of claims running materially above the expected level may indicate a trend that should be investigated before renewal.
- A disability claim that continues for an extended period should prompt a review of the available return-to-work and disability-management support. Early communication and accommodation can help shorten disability duration, although the appropriate intervention depends on the employee’s circumstances and the nature of the claim.
- A sudden increase in paramedical or dental utilization without a corresponding headcount change may reflect changes in employee usage, plan awareness, seasonal patterns, or data issues and should be investigated before drawing conclusions.
Ask your broker to identify the claims indicators that should trigger a mid-year review for your specific plan and agree on the threshold for taking action.
Quarterly Plan Reviews With Your Broker
Monthly data feeds into quarterly conversations that should follow a structured agenda. Each quarterly review should cover:
- claims trajectory versus budget, with a clear statement of whether the plan is tracking above, at, or below expected costs for the year;
- emerging trends by benefit category, particularly drug, dental, paramedical, and disability costs;
- any mid-year interventions taken since the previous review and their measurable or observable results; and
- forward-looking projections for the upcoming renewal based on year-to-date claims data.
The purpose of the quarterly review is to turn claims data into decisions. If a cost driver is emerging, the employer and broker can determine whether it requires further investigation, a claims-management intervention, or a plan-design change.
The discipline of quarterly reviews also strengthens your negotiating position at renewal. When you arrive at the renewal conversation with tracked claims data, documented interventions, and a clear understanding of where your costs are coming from, you are negotiating from knowledge rather than reacting to a number the provider has presented. This gives you a better basis for deciding which changes to request, challenge, or accept.
Ask your broker to provide a quarterly summary that shows the main cost drivers, changes since the previous review, actions taken, and the issues that could affect the next renewal.
