Rising health costs demand clear conversations

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As healthcare costs surge and total rewards budgets feel the squeeze, Aon’s Shelley Russell says employers must turn data into stories − explaining the “why” behind benefit changes to build trust, manage risk, and support employee well-being

IT MAY seem an unlikely strategy at first blush, but according to Shelley Russell of Aon, an employer’s best bet for delivering tough news around the rising costs of healthcare starts with … a story. Like many effective approaches, this one was born of necessity. Aon partnered with a client whose plan costs were exceeding the current funding model and who needed to explain, first to decision-makers and then to employees, why their share of costs would be increasing. The decision-makers were highly cognizant that inflation is already challenging their workforce and was determined not to add to that burden without clearly explaining the reasons behind the change.

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“The key is to pick a starting point, create that initial messaging, and build from there”

SHELLEY RUSSELL, AON

“We started at the beginning: what is provided, why it’s provided, and how the plan is funded,” explains Russell. “We showcased how inflationary pressures were increasing costs and in turn impacting organizational budgets. We then expanded the conversation to connect, piece by piece, each decision to its cost impact and to people’s experience on the ground. The key is to pick a starting point, create that initial messaging, and build from there.” Rooted in the idea that most employees don’t have a line of sight as to the complexity of managing benefit programs, Aon is now working with employers to shift the narrative to build that understanding. “A benefit program is only as great as your employees think it is,” Russell says. “Communication and ongoing transparency are critical to not only assessing if they think it’s great, but helping them understand why, in some cases, it might not be.”

Behind those “tough news” conversations sits a simple reality: healthcare costs are climbing at a record pace, with Aon’s data showing increases at nearly four times the rate of inflation. Demographic shifts mean employers are supporting at least four generations in the workforce, Russell notes, each with different needs and varying levels of chronic conditions and mental health concerns. At the same time, many can’t easily access public healthcare: data shows 17 percent of people don’t have a regular doctor, prompting a corresponding spike in the use of paramedical practitioners as the gap drives greater use of employer-funded benefits, more sick leave, and increased disability claims. Some of the sharpest pressures for Canadian employers include costs to support chronic disease management and specialty drugs to treat rare or complex conditions. “Advances in medicine, while positive, also add cost and complexity,” Russell says. “As new therapies are introduced to market, prescribing migrates to the latest and typically more expensive treatment − referred to as preference shift. This exacerbates what we call ‘the cost of innovation’ within plans as the technology develops faster than we can design cost containment models to mitigate them.”

These dynamics reshape the entire rewards equation, with employers forced to make conscious trade-offs not just within benefit plans but across salary, pension, and other programs. Russell describes the visual she uses with clients. It’s a rectangle divided into four quarters − compensation, health benefits, retirement, and other rewards − and “that box doesn’t move,” she notes. So, as some costs inflate, other areas shrink, because there’s only so much in every organization’s budget to spend on their workforce and rewards.

“In order to attract and retain the best talent, they’re having to make some very conscious choices,” Russell adds. “We’re seeing many organizations take inventory of everything they’ve got going on and looking to see where they could potentially reinvest dollars into different components of their programs − where they’re seeing additional pressure, and in some areas not receiving as much pressure.” That’s happening against what she calls a compounding challenge. Employee expectations are evolving. Striking the right balance between cost control and meaningful, sustainable employee experiences has become both more complex and more critical. All of this sets the stage for the next, equally important question: once employers understand what’s driving costs and the trade-offs they must make, how do they communicate those realities transparently to employees? Rather than a single, dense memo at renewal or re-enrollment, ongoing dialogue that revisits building blocks over time gives employees space to react and ask questions, and lets employers course correct based on that feedback. With this approach, employees see not only what is changing but why and how leaders are trying to manage costs responsibly. Some employers are using specific hot-button issues to make the trade-offs real. Weight-loss drugs are a popular example. A transparent message could indicate that your plan covers these medications: here’s how much we’re investing, here’s the cost, and here’s why the organization believes the long-term benefits in health and productivity are worth it. Framed that way, employees see the logic behind a coverage decision rather than experiencing it as a mysterious line item.

“Like in other aspects of life, trust is fundamental − that’s where transparency becomes a strategic asset, not just a communications tactic”

While the ecosystem of rising costs is out of everyone’s control, managing the fallout isn’t. Organizations can look to strategic partners for opportunities to mitigate financial risk, such as cost-sharing, adjusted drug coverage, and pooling or captives to protect plan sponsors from the most extreme claims. And while transparency over dollars and cents is critical, focusing only on the budget lines risks missing powerful components that sit outside the traditional benefits envelope. The need for career reskilling, training, and support programs is rising in the workplace, alongside perks like flexible work arrangements and supportive paid-time-off policies. These may not show up as line items in the budget, but “how those are all managed also factors into that total perception of an organization’s strategy,” Russell says, adding that training in particular is a missed opportunity.

While many workplaces offer more than mandatory courses, some employees aren’t fully aware of all the programs being offered − which means they don’t see it as part of the support they receive. In a cost-challenged environment, pulling levers that are already there and communicating them clearly can meaningfully shift how employees experience the total rewards offering. Ultimately, Russell believes the most effective strategies are those embedded into an employee-focused, supportive organizational culture that honours overall health and well-being and the broader employee value proposition (EVP), rather than flashy extras that are more form than substance. One example Russell saw first-hand was a client introducing well-being days, which weren’t an added cost but were communicated clearly as well-deserved time for employees to take care of themselves. The level of feedback and appreciation they got − not just for the day off but for the messaging behind it − was incredible.

Setting the stage: why benefit costs are rising

Creating an ecosystem of support and trust

Published March 16, 2026

RISING NUMBERS

Total rewards budgets are expected to increase 22 percent over the next four years, and healthcare costs account for about one-third of that spend.

22%

More than 70 percent of employers surveyed said cost concerns were the biggest barriers to a successful total rewards strategy.

70%

Total rewards impact

Source: Aon’s 2025 Total Rewards Strategy Study; IMF World Economic Outlook, April 2025

Just over one-third said they wanted to completely redesign total rewards.

1/3

“It resonated with their people and underscored how every little piece matters,” Russell says. “Like in other aspects of life, trust is fundamental − that’s where transparency becomes a strategic asset, not just a communications tactic.” If there’s a single throughline to her advice, it’s the importance of truly understanding what employees value and then explaining, clearly, how that insight shapes decisions. She urges organizations to combine hard data with employee insights and to weave those into decision-making when choices are tough.

SHELLEY RUSSELL, AON

Done well, that approach, combined with tying the story of rising costs back to a longer-term commitment to employee well-being and experience, doesn’t just make benefit changes easier to explain; it continues to build trust and help organizations endure through difficult financial times.

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Companies People NewsletterAbout us Authors Privacy Policy Cookie Policy

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News

Opinion and best practice

Special Reports

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SPECIALIzATION

Benefits Change Management Corporate Wellness Diversity & inclusion Employee engagement

Employment law ESG Financial wellness Immigration Industrial relations

Leadership Learning & development Mental health MICE Payroll

Recruitment Reward & recognition Transformation Workplace health & safety

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Canada HR events

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