The survey found that 12% of U.S. adults borrowed money to pay for health care for themselves or a family member. Among those who had, 42% borrowed $1,000 or more.

The survey also identified a more alarming trend: Medical debt goes far beyond financial instability. The poll revealed that 58% of respondents shared they were concerned that a major health event could lead to medical debt. Even 40% of Americans with household incomes of $180,000 or more per year — well above the nation’s median household income of $114,425 — said they are concerned.

Employers should be concerned about the impact of health care costs and medical debt on their employees’ overall wellbeing. Financial stress is not something that solely happens outside the four walls of a business.

Medical debt concerns and the impact on the workforce

While nearly all business owners recognize their rising health care costs, most employers don’t understand the true business impact. A separate survey found that nearly 50% of employees admitted that financial stress distracts them during the workday, while 84% said financial concerns contribute to exhaustion and burnout.

In addition to diminished productivity or declining mental health, employees’ concerns about health care affordability can impact their physical wellbeing. One in four adults skipped or postponed health care because of the cost, on top of 1 in 5 adults not filling a prescription due to the cost. These unfortunate trends can lead to a vicious cycle where employees endure more financial stress from missing time at work, and higher health care costs due to delayed treatment.

Unfortunately, those who put off care because of costs can end up paying more in the long run. This is something that directly affects employees that are underinsured, or what some call “functionally uninsured.” Despite having health coverage through an employer, this group still cannot afford health care due to high premiums, deductibles and out-of-pocket maximums.

From functionally uninsured to adequately covered

To address the impact of rising health care costs, it’s important for employers and their benefits advisors to look at their internal health utilization and see where they can find cost-saving opportunities that benefit both their business and employees.

Today, most employers offer preferred provider organization (PPO) health plans. PPOs partner with a group of clinics, hospitals, and doctors to create a broad and convenient network of preferred doctors and members (employees and dependents) and sponsors (employers). However, convenience comes at a price for both the employee and employer in the form of higher healthcare costs and employee cost-sharing through higher monthly premiums.

Under a PPO, an average employee’s annual premium contribution for single coverage 2024 was $1,495 and employers contributed $7,889.

Instead of defaulting to the status quo offering of PPOs, employers and advisors should evaluate alternative health plans that prioritize value, including those that utilize reference-based pricing (RBP). RBP uses standard rates, including Medicare, as a baseline to make fair and transparent health care payments and is proven to save nearly 20% on overall health care costs. Given that employers pay an annual average of nearly $8,000 to cover individual workers under a PPO, these savings add up quickly.

Employers that make the move to an RBP option can reinvest these savings in their employees through lower health plan premiums, deductibles, and out-of-pocket maximums — helping mitigate the risk for employees to acquire unnecessary medical debt.

These savings can be put into business expansion and more lucrative benefits that drive employee retention and recruitment. It’s a win-win for all parties.

Employers that still want to give their employees the option of convenience through a PPO plan can explore a dual-option plan. This offers a traditional PPO plan alongside a significantly discounted RBP plan. By doing so, employees are empowered to choose a health plan that meets their financial, personal and health care needs.

Employers and their benefits advisors must focus on providing adequate health care coverage that doesn’t leave employees functionally uninsured, effectively putting them under significant risk of medical debt. If not, we contribute to an often silent, yet chronic, health issue that employees are facing: financial wellbeing.

Jeff Bak is president and CEO of Imagine360.