While US employers may pass health costs to employees, Canada faces a different challenge, says Mercer's Paul Kennedy
As healthcare costs continue climbing, employers on both sides of the border are being forced to make tough decisions, particularly in benefits strategies.
In the US, recent research from consulting firm Mercer suggests more companies are considering shifting a greater share of health benefits costs onto their workers by 2026.
But is the same trend emerging in Canada?
Mercer Canada’s chief health actuary doesn’t think so, at least not yet. Paul Kennedy clarified that while US employers may be actively planning benefit cuts or cost-sharing strategies, the current Canadian landscape looks vastly different.
“What I can say, first and foremost is that it's not where we are right now in Canada,” said Kennedy. “What we are hearing from employers is that before they get to that stage where they're considering cost shifting or cuts to the benefits, they're looking at strategies to be able to unlock savings. And frankly, like a lot of those strategies to unlock savings, they've been in place in the United States for a while now.”
Such strategies are only now gaining traction in Canada as costs begin to rise more sharply, Kennedy explained. Even with that increase, he pointed out that US employers face steeper costs overall.
“The average cost for an employee with family coverage in the United States is $23,000 for the employer compared to $4,000 in Canada,” he noted, which gives “a bigger bang for the buck in the United States when it comes to things like benefit reductions or cost shifting.”
Kennedy also pointed to Mercer's research that found 40 per cent of Canadian employees are currently worried about covering monthly expenses and who are living paycheck to paycheck. That reality, he emphasized, is a major reason why most employers are reluctant to push more healthcare costs onto workers, especially in sectors still struggling to attract and retain talent.
Rather than cutting or cost-shifting, Kennedy said employers are asking a different question: whether they’ve “covered all their bases to unlock savings associated with the plan.”
In many instances, the answer is no and that’s where the focus remains as he described the current opportunity for cost containment in Canada as “relatively low-hanging fruit.”
Still, while cost pressures are mounting on both sides of the border, Kennedy emphasized that Canadian employers are still prioritizing talent acquisition and retention over shifting healthcare costs onto employees and still view benefits as a core part of that strategy.
He pointed to data from the Conference Board of Canada showing that employees are often willing to accept lower pay if it means receiving better benefits, something employers are taking seriously amid ongoing competition for skilled labor.
Even in industries impacted by economic uncertainty or trade issues, he said companies are exploring other ways to reduce costs before touching employee benefits.
And while cost containment is definitely on the agenda, Kennedy stressed that doesn't automatically mean cuts are coming.
“Our most recent innovative benefits survey indicated that 88 per cent of employers are in the process of developing or will develop cost containment strategies over the next three years,” he said, adding strategies often center around improved governance, an area where US employers have already seen results and where Canadian companies are beginning to realize similar returns.
Kennedy believes today’s uncertain economic climate - shaped by factors like tariffs and global volatility - is forcing employers to reassess the underlying purpose of their benefits programs. As companies re-evaluate their goals, many are recognizing that the traditional “one-size-fits-all” approach no longer aligns with the realities of a diverse workforce.
He noted that Canada’s labour force includes four distinct generations, each with its own set of needs and priorities. That complexity is pushing employers to introduce more flexible and personalized benefits like virtual therapy, substance use support, health coaching, fertility services, and elder care.
“You might have the older generation that doesn't need childcare services, but does need elder care services,” he noted.
According to Kennedy, roughly half of benefit plans now include some degree of customization, with options for employees to tailor coverage, opting up for additional services or scaling back when coverage is redundant, such as when a spouse’s plan fills the gap. These modular, flexible strategies are becoming a practical solution for organizations trying to control costs without compromising employee satisfaction.
While Kennedy acknowledged that some Canadian employers, particularly those with US-based parent companies may face increased pressure to rein in benefit spending, he stressed that most Canadian organizations are still focused on internal efficiencies before considering cuts that would impact employees.
Notably, traditional governance tools like audits, which haven’t always delivered measurable returns, are beginning to show more promise. But the broader sentiment, he explained, is that employers are reluctant to jeopardize employee satisfaction and retention by scaling back benefits.
“There’s still a war on talent. Employees are very aware of the value that the benefit programs can provide and will look at that in terms of making decisions with respect to what company they wish to work for,” he said. “We really have not been hearing much in the market in terms of pressure to cut the benefits programs right now.
