Soaring health care costs squeezing consumer spending in other areas

Rising health care costs mean less savings, less care and less leisure spending for the majority of Americans. Benefits and the Great Resignation, a new report from Lively, offers insights into the impact of health care costs on other areas of consumers’ financial lives. Here are a few from the comprehensive report:

Rising health care costs are preventing people from achieving financial goals and saving for the future. Although everyone is experiencing the pain of higher prices, younger generations and lower-income Americans are especially affected. Gen Z and millennials are more likely than their older counterparts to ignore doctors’ recommendations, avoid going to the doctor or delay or skip medication because of cost.

Overall, Americans are not saving for medical emergencies or routine out-of-pocket costs. Most Americans are falling severely short on saving for a medical emergency or even budgeting for routine out-of-pocket costs: More than 50 percent have only $250 or less saved for an emergency, and 68 percent of people who make less than $50,000 annually have only this much saved.

Six in 10 have delayed actions such as saving, paying down debt or going on vacation as a result of health care costs. Although 61 percent of Americans have had life events affected by health care costs, younger people especially have been affected.

By contrast, 51 percent of those over 45 are less likely to have delayed any actions. Delays are similar across income levels with the exception of paying down debt, which lower-income Americans are more likely to have delayed because of health care costs.

Americans do not fully understand the health care landscape and options available to them. People are divided on understanding of high-deductible health plans, health care reimbursement arrangements and health savings accounts. Although men and higher-income people are more likely to understand the various terms, overall understanding has fallen since last year’s report.

Four in 10 Americans do not have an HSA. The majority of those who have HSAs say their employer contributes just $250 or less annually.

Eighteen percent do not have employer contributions, and 38 percent do not have an HSA. Adults aged 55 or older are less likely to have an HSA or employer contributions.

Although access to mental health services is low, the likelihood of accessing them if covered by health insurance is high. More than half of Americans say they are very or somewhat likely to seek mental health services if their health-care benefits cover them, but 14 percent with health insurance do not have mental health coverage.

Despite the interest and need for mental health services, only 40 percent have accessed such services this year, indicating a gap between coverage and needs.

Seven in 10 have not used HSA or FSA dollars for mental health services. Overall, 61 percent of those with an HSA or FSA are very or somewhat likely to use their account dollars to pay for mental health services if they knew those services were a qualified expense.

However, 76 percent of those under 45 would be likely to spend their HSA or FSA on mental health services, compared to only 45 percent of those over 45.

In addition, 74 percent of women are more likely to have not spent their HSA or FSA on mental health care.

“The bottom line is that Americans are stressed, both emotionally and financially,” the report concluded. “In this volatile economy and challenging hiring environment, employers and benefits providers must work together to offer benefits that make it easy for employees to plan for the future and to get the most out of the present moment.”