Higher health-care expenses forcing financial trade-offs, surveys say
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Rising healthcare expenses, as part of an overall rise in the cost of living, are forcing some Americans, including those with higher incomes, to make difficult financial choices.
According to global consulting firm Mercer, total employee health benefit costs are projected to increase by 6.7% on average in 2026, pushing the average cost per employee to more than $18,500. The company said this was the steepest jump in 15 years.
This year, premiums for families with employer-sponsored plans rose 6 percent, more than double the 2.7 percent inflation rate and outpacing wage growth of 4 percent. According to KFFA nonprofit health policy research firm. The vast majority of Americans approximately 165 million people, Employees, including their dependents, can obtain health insurance through their employers.
It’s not just the cost of insurance coverage that’s rising. Experts say consumers are using more medical services and prescriptions, contributing to higher health care expenses.
“We’re aging as a population. So there’s going to be ailments, there’s going to be more heart disease, there’s going to be more diabetes, all of those things are trending higher, so there’s going to be additional usage,” said Kaleialoha Cadinha-Pua’a, chief executive officer and chief investment officer of Cadinha & Company in Honolulu, which ranks No. 15 on CNBC’s 2025 Financial Advisor 100 list.
According to the study, nearly 21 percent of all adults surveyed said that the expenses that have increased the most for them in an environment where living costs are rising are healthcare and insurance. 2026 KeyBank Financial Mobility Survey. 30% of high-income earners, or those earning $100,000 or more per year, say healthcare and insurance are the expenses most influential in increasing the cost of living.
The online survey surveyed more than 1,000 Americans ages 18 to 70 in July who were solely or jointly responsible for financial decisions in their homes.
As a direct result of the rising cost of living, 26% of all adults surveyed said they were tapping into emergency savings and 12% said they were reducing retirement contributions to their 401(k) or IRA. 19% of those making $100,000 or more said they had reduced their retirement contributions.
Cadinha-Pua’a said managing rising living costs is “an ever-moving target.” “More investors now have to worry about all these moving parts and all these different sized eggs in their baskets.”
Even as some Americans make deliberate compromises to cover daily expenses, they’re watching their savings dwindle, according to a KeyBank survey. Two-thirds of survey respondents said they had less money left in savings in 2025 than last year.
Experts we spoke with recommended taking these steps to manage rising health care costs.
Find out your health plan costs and what’s changing
Take time to understand all costs of your health plan.
“The vast majority of people I talk to — I don’t care how well educated they are, I don’t care how much they make — they don’t understand what health care is until something happens,” said Mary Clements Evans, a certified financial planner and owner of Evans Wealth Strategies in Emmaus, Pennsylvania.
Terms to know include:
- Co-pays are fixed amounts you pay for certain services, such as a prescription or a doctor’s visit.
- Deductibles are the amount you pay for medical expenses before coverage begins.
- Co-insurance is the portion of medical expenses you share with the insurance company once you reach your deductible.
- Out-of-pocket maximums are the upper limit of what you’ll pay for the plan year, but do not include premiums or excluded services.
“Everything could be going well, and then all of a sudden things happen and we end up in the emergency room or having surgery, and now all of a sudden they get a $5,000 bill and they’re stunned,” said Evans, who is also the author of “Emotionally Invested.”
Experts say employers may change some of the plan’s terms (mostly deductibles) to prevent premiums from rising further, which could lead to higher out-of-pocket expenses for employees. Last year the average deductible was $4,063 for family coverage and $2,085 for individuals. According to KFF.
Optimize health-related accounts
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Add up your potential out-of-pocket expenses to get an idea of how much you’ll need to save in case of a health emergency.
“I want to see the money saved but also available for use. So if something happens, you have it and then if you have to use it, you can go ahead and replace it,” Evans said.
One strategy that can help: Take advantage Private health accounts your employer may offer:
- A flexible spending account, or FSA, allows you to pay for health care expenses, such as co-pays, medications, or glasses, with pre-tax dollars. The amount allocated in 2026 can go up to $3,400. However, the money deposited for the year usually needs to be spent on medical expenses by the end of the year, otherwise it is lost. Some employers offer a grace period to spend your previous year’s balance or allow you to carry over a certain amount to the next year.
- A health savings account, or HSA, is a savings and investment account that offers significant tax savings. If you enroll in a qualified high-deductible health insurance plan, you can deposit pre-tax dollars into an HSA, see tax-free growth in those funds, and enjoy tax-free withdrawals as long as the funds are used for qualified medical expenses. For 2026, contributions are limited to $4,400 for individuals and $8,750 for a family. Individuals 55 and older can contribute an additional $1,000.
“If you can afford to leave the health savings account untouched for current medical expenses and let it continue to grow, it could become a really meaningful source of health care coverage down the road,” said Emily Harper, CFP, Monument Wealth Advisors in Alexandria, Virginia.
Make sure you can cover worst-case out-of-pocket expenses that may come with a high-deductible plan, he said.
Identify potential trade-offs
Examine your cash flow and goals to identify potential trade-offs for managing higher healthcare costs. It can be difficult to find additional savings when insurance, electricity and grocery costs are also increasing. Still, experts say spending should be taken carefully before making deductions from retirement or other savings.
“Recognizing that inflation is very real for all Americans and that we’re all dealing with it, I would like people to step back and … evaluate their budget holistically before they start pulling on some of these levers in their own personal situations,” said Dan Brown, KeyBank’s executive vice president and director of consumer products management.
Your evaluation Paycheck tax withholding can help improve cash flow.
“If you’re getting a tax refund, that means you paid too much money during the year,” Harper said. Adjustments and new cuts to President Donald Trump’s “big beautiful bill” could result in larger refunds for some taxpayers next year. “People’s tax situation could look very different than it was when they started the year,” he said.
However, make sure you pay enough during the year to avoid having to pay penalties.
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