Rising Health Costs Force Financial Trade-Offs

Rising health-care expenses, fueled by an overall increase in the cost of living, are compelling Americans—including those with higher incomes—to make difficult financial decisions. Recent surveys indicate that the average cost of employer-sponsored health insurance is projected to climb by 6.7% next year, pushing the total average benefit cost per employee above $18,500. Global consulting firm Mercer calls this the steepest jump in 15 years.

For many, these costs are inescapable. Premiums for families using employer-sponsored plans rose 6% this year, outpacing both wage growth (4%) and inflation (2.7%). Furthermore, consumers are using more medical services and prescriptions, a trend experts attribute partly to an aging population experiencing higher rates of ailments such as heart disease and diabetes.

The financial burden is palpable: The 2026 KeyBank Financial Mobility Survey found that 21% of all adults cited health care and insurance as the expenses that have increased the most for them. Among higher earners (making $100,000 annually or more), that number rises to 30%.

These costs are forcing significant financial trade-offs. Nearly two-thirds of those surveyed in 2025 reported having less money in their savings than the previous year. As a direct result of rising costs, 26% of adults have drawn from their emergency savings, and 12% have reduced contributions to their retirement accounts like 401(k)s or IRAs. Among higher earners, 19% have reduced retirement contributions.

The ACA Marketplace is facing a particular crisis, with private insurance premiums set to rise sharply in 2026. Estimates suggest that if the enhanced premium tax credits—which expanded financial assistance during the COVID-19 pandemic—are allowed to expire at the end of 2025, 7.3 million people will lose their subsidies. The average monthly premium for remaining enrollees could increase by 114%, according to KFF estimates.

In the face of these headwinds, experts urge consumers to prioritize understanding their coverage. Financial advisors note that many people, regardless of education or income, do not fully grasp their health care plan details until a significant event occurs, leading to unexpected bills. Consumers are advised to review terms like copayments, deductibles (which averaged $4,063 for family coverage last year), co-insurance, and out-of-pocket maximums.

One strategy is optimizing health-related accounts like Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs). HSAs, which require enrollment in a qualified high-deductible plan, offer triple tax savings and can grow into a "meaningful source of health-care coverage down the road" if left untouched for current expenses.

For individuals who must purchase private insurance, options outside the ACA Marketplace may offer lower premiums but require extreme caution. Non-ACA compliant plans, such as short-term insurance plans or healthshares, often lack essential consumer protections, do not have to cover pre-existing conditions, or may impose annual and lifetime caps on benefits. Within the ACA Marketplace, consumers seeking lower premiums can look at Bronze or Catastrophic plans, but they must be prepared for high deductibles. For Bronze plans, deductibles average nearly $7,500 nationally.

Ultimately, advisors recommend evaluating budgets holistically before cutting retirement savings. However, some experts acknowledge that without systemic change, many individuals will be "completely priced out of insurance" and should persistently contact elected officials to convey how policies are impacting their lives.

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🔖 Sources

Private health insurance costs are going up. A complete guide to your coverage options

Higher health-care costs force financial trade-offs: Investors ‘worry about all these moving pieces,’ top advisor says

Worried about health insurance costs? There may be cheaper options — but with trade-offs

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Keywords:Financial trade-offs

Financial trade-offs

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