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Is your benefits strategy keeping up with rising health care costs? What the 2026 HCSA report reveals
By: Benefits by Design | Tuesday September 15, 2026
Updated : Monday September 14, 2026
As health care costs continue to rise, many employers are re-evaluating their benefits strategy. The challenge is no longer simply offering coverage. On one hand, employees want more flexibility, better access to care, and benefits that reflect their unique needs. On the other hand, health care costs continue to rise, wait times remain a challenge, and employers are under pressure to keep benefits plans affordable and sustainable.
It raises an important question: Are traditional benefits plans enough on their own anymore?
Our 2026 Report: The State of Health Care Spending Accounts (HCSAs) suggests that many employers are turning to HCSAs as part of the answer. But perhaps the most interesting finding isn’t that HCSAs continue to grow in popularity. It’s that they appear to deliver the greatest value when they are used as a flexible layer within a broader benefits strategy rather than as a standalone solution.
Download the free report to explore utilization trends, employer funding levels, and how Canadian organizations are using HCSAs to support employees while managing rising benefits costs.
Why traditional benefits plans are under pressure
The challenge isn’t that traditional benefits are failing. The challenge is that the environment around them has changed.
According to the Canadian Institute for Health Information (CIHI), total health care spending in Canada reached $399 billion in 2025, representing $9,626 per Canadian. Health expenditures are projected to account for 12.7% of GDP, highlighting the increasing financial pressure on the health care system.
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Employees are also encountering challenges accessing care. Long wait times for specialist treatment and diagnostic services can delay treatment, worsening health conditions and potentially increasing costs over time. Some Canadians may wait several months for MRI services, while specialist referrals can take many months depending on the province and treatment required.
At the same time, prescription drug costs continue to rise. According to data cited in the report, the average annual amount claimed per person for prescription medications has increased by more than 60% since 2015.
Together, these factors place additional pressure on traditional benefits plans and increase the likelihood that employees will reach annual maximums or frequency limits for certain services.
The growing role of flexibility
Employee expectations have evolved alongside these challenges.
Benefits are no longer viewed solely as protection against unexpected health expenses. Employees increasingly want benefits that allow them to prioritize their individual needs and circumstances.
This is one reason HCSAs continue to gain attention.
Unlike traditional insured benefits, an HCSA gives employees the flexibility to decide how they want to allocate available benefit dollars across eligible health and dental expenses. One employee may use their funds for vision care, while another may prioritize physiotherapy, massage therapy, or other qualified expenses.
At the same time, employers maintain greater budget certainty because they choose the annual allocation amount in advance.
This combination of flexibility and predictability is becoming increasingly valuable as benefits costs continue to rise.
Everything You Need to Know About Health Care Spending Accounts
A surprising finding from the 2026 report
One of the more interesting observations from our analysis relates to how HCSAs are being used.
When we compared organizations that offered other insured benefits with those that did not, we found that companies with five or more employees and broader benefit plans generally provided larger HCSA allotments than organizations using HCSAs on their own.
This suggests something important: Rather than replacing traditional benefits, HCSAs may provide the most value when they complement them.
A traditional health and dental plan can help protect employees against common and catastrophic health expenses. An HCSA can then provide an additional layer of flexibility, helping employees cover costs that fall outside plan limits or prioritize services that matter most to them.
In other words, employers may not need to choose between traditional benefits and flexibility. Increasingly, they’re using both.
The future of benefits may be layered
Another finding from the report reinforces this idea. According to the 2025 Benefits Canada Health Care Survey, 59% of employees are reaching annual maximums in at least one area of their fully insured benefits. When employees exhaust traditional coverage, a HCSA can provide additional support that helps reduce out-of-pocket costs.
List of Health Care Spending Accounts (HCSA) Eligible Expenses
At a time when health care spending is increasing and employees are actively evaluating benefits when considering employment opportunities, flexibility can become a meaningful competitive advantage.
The bottom line
Traditional benefits remain an essential part of a strong employee benefits program.
However, rising health care costs, increasing utilization pressures, and evolving employee expectations are creating new challenges for employers.
Our 2026 HCSA Report suggests that many organizations are responding by adding flexibility rather than simply increasing coverage.
For employers looking to balance employee choice with budget certainty, a HCSA may be most effective not as a standalone solution, but as a strategic layer within a broader benefits plan.
Download the 2026 Report to explore the data and discover how Canadian employers are using HCSAs to strengthen their benefits strategies.
2026 Report | The state of Health Care Spending Accounts
