Why Did My Group Benefits Renewal Increase? 7 Factors Canadian Employers Should Know

1. Your Group's Claims Experience

For many health and dental plans, claims experience is one of the most important pieces of the renewal discussion.

Insurers look at the claims paid under the plan during the experience period and compare that experience with the monthly costs collected, along with other pricing factors. If claims have been consistently higher than expected, the insurance company may adjust the rates.

For example, imagine a company that has historically had relatively low dental claims. During one year, several employees require major restorative work, crowns or other expensive procedures. Those claims can materially affect the experience of a smaller group.

This is particularly important for smaller employers because one or two significant claims can represent a meaningful percentage of the group's total claims.

The important question is not simply, "Were claims high?"

Ask instead:

• Which benefit categories produced the increase?
• Was the experience unusually high for one year?
• How does the insurance company's expected experience compare with actual experience?
• Which portions of the renewal are based on the group's own experience and which are based on broader pricing factors?

A renewal review should explain the numbers rather than simply present the final monthly cost.

2. Prescription Drug Costs

Prescription drug spending is another major pressure point for Canadian group benefit plans.

The Canadian benefits environment has seen increasing attention on specialty medications, high-cost drugs and newer therapies. Alberta Blue Cross's 2026 Benefits Pulse reporting specifically highlights prescription drug spending, specialty medications and GLP-1 drugs as areas employers and plan sponsors need to manage carefully.

A plan can therefore experience increased drug costs even when the number of employees has not changed significantly.

The answer is not automatically to remove drug coverage. Instead, employers should understand how the plan manages expensive medications, prior authorization, generic substitution, biosimilars where applicable, and other cost-management mechanisms.

3. Dental Costs and Utilization

Dental benefits can also contribute significantly to a renewal increase.

Dental costs can rise because employees are using more services, because the cost of services has increased, or because the mix of services being claimed has changed.

For example, routine preventive services are generally less expensive than major restorative procedures. A group with several employees requiring extensive dental treatment can have a very different claims profile from a group whose members primarily use preventive care.

When reviewing a dental renewal, look beyond the overall percentage increase.

Ask for the actual experience by category and consider whether plan design still makes sense for the workforce.

4. Mental Health and Paramedical Utilization

Mental health services, counselling and other paramedical services have become an increasingly visible part of employee benefits.

These services can provide real value to employees, but increased utilization can also affect plan costs.

That does not mean employers should simply reduce mental health coverage. A better question is whether the plan is structured efficiently.

For example, employers can review annual maximums, practitioner categories, reasonable and customary limits, and whether employees understand what services are available through the plan.

Sun Life research indicates that mental health claims account for nearly 40% of long-term disability claims. This highlights the importance of considering mental health support as part of a broader benefits and disability management strategy.

5. High-Cost Claims

One employee's major medical event can have a noticeable effect on a smaller benefits plan.

High-cost claims may include expensive medications, complex treatments or significant ongoing healthcare needs.

This is one reason employers should be cautious about judging a benefits plan based only on one year's claims.

Ask whether the renewal is being affected by unusually high claims and how pooling or other insurance company risk-management mechanisms are being applied.

The goal is to distinguish between a temporary event and a broader utilization trend.

6. Trend and Inflation

Benefits pricing also reflects expected future costs.

Even if your company's claims experience is stable, insurance companies may apply trend factors to account for expected increases in healthcare and treatment costs.

The Canadian Life and Health Insurance Association reported that Canadian life and health insurance companies paid $143.3 billion in insurance benefits and retirement solutions in 2024, up nearly 12% from the previous year. That figure covers a broad range of insurance products and is not a direct measure of group benefits monthly costs, but it illustrates the scale of rising claims and benefit payments across the Canadian insurance environment.

The important point for employers is that renewal pricing is not necessarily a direct calculation of last year's claims.

7. Changes in Your Employee Population

Your workforce itself can affect your plan.

A company that has hired more employees, changed its age distribution, added defendant or experienced turnover may see a different risk profile than it had previously.

For example, adding several employees with families can change utilization patterns even if the total headcount increase is modest.

This is another reason renewal analysis should look at the composition of the group, not just the total monthly cost.

What Should Employers Do When the Renewal Arrives?

Before accepting the renewal, ask your broker or advisor to walk through the numbers.

A useful renewal review should answer:

1. What is the total increase?
2. Which benefit lines are driving the increase?
3. How much is related to claims experience?
4. How much is related to trend or other pricing factors?
5. Were there any unusually large claims?
6. How does the group's utilization compare with expectations?
7. Are there plan design changes that could reduce cost without eliminating important coverage?
8. What alternatives are available from the current insurance company and other insurance company's?

Don't Cut Benefits Before Understanding the Problem

One of the easiest reactions to a renewal increase is to cut coverage immediately.

That can be a mistake.

Reducing paramedical maximums, increasing deductibles or removing certain services may reduce monthly costs, but it can also reduce the perceived value of the plan and shift more costs to employees.

The better strategy is to identify the actual cost drivers first.

If prescription drugs are driving the increase, review drug management.

If dental claims are driving the increase, review dental design.

If mental health and paramedical utilization is increasing, examine whether the plan is structured efficiently and whether employees are using the right resources.

The solution should match the problem.

A Renewal Is a Review Opportunity

A benefits renewal should not be treated as a bill that simply needs to be approved.

It is an opportunity to ask whether the plan is still appropriate for your employees, whether the pricing is competitive and whether the design reflects the company's current priorities.

At Next Benefits, we help Canadian employers look beyond the renewal percentage and understand what is actually changing.

If your upcoming renewal is higher than expected, start with the numbers. Understand the drivers. Then evaluate the options.

That is a much stronger starting point than simply asking, "How can we make the monthly cost cheaper?

*CLHIA 2025 Facts, Alberta Blue Cross 2026 Benefits Pulse*