Rising Health Care Costs Impacting Americans

Health care expenses are increasing, part of a broader trend in rising living costs, which is forcing many Americans, even those with higher incomes, to face difficult financial decisions.

A report from Mercer, a global consulting firm, predicts that total employee health benefit costs could rise by an average of 6.7% in 2026, pushing the average cost per employee past $18,500. This would mark the largest increase seen in 15 years.

For households with employer-sponsored insurance, premiums went up by 6% this year. This rise significantly outpaces the 2.7% inflation rate and exceeds wage growth, which stands at 4%. As noted by KFF, around 165 million Americans—both employees and their dependents—purchase health insurance through their employers.

It’s not only premiums that are on the rise. Consumption of medical services and prescriptions is also increasing, which experts believe is driving up health care costs.

“As we age, we generally need more medical care due to worsening health conditions like heart disease and diabetes,” stated Kaleialoha Cadinha Pua’a, CEO and Chief Investment Officer at Cadinha & Company in Honolulu, who ranks 15th on CNBC’s 2025 Financial Advisors list.

According to the 2026 KeyBank Financial Mobility Survey, roughly 21% of surveyed adults indicated that health care and insurance were their biggest expenses impacted by rising living costs. Notably, 30% of high-income earners, those making over $100,000 annually, echoed this sentiment.

The online survey, conducted in July with over 1,000 participants aged 18 to 70 who handle their household’s financial decisions, revealed that the rising cost of living led 26% of adults to dip into their emergency savings. Additionally, 12% reduced their retirement contributions to a 401(k) or IRA. Among high earners, 19% reported cutting back on retirement benefits.

Cadinha Pua’a remarked that managing the increasing cost of living is an “ever-changing goal.” “Investors have to navigate these shifting factors with their portfolios,” she added.

Despite some Americans making difficult choices to sustain daily expenses, they find their savings shrinking. Two-thirds of those polled expressed expectations of saving less in 2025 compared to the previous year.

Strategies for Managing Rising Health Care Costs

Experts suggest understanding health insurance costs and any changes that may arise. Many people underestimate these details until unexpected health events occur.

Mary Clements Evans, a certified financial planner, emphasized that most people, regardless of their education or income, are often unaware of their medical costs until it’s too late. She noted that an unexpected emergency room visit can suddenly lead to a shocking bill.

Key health insurance terms to comprehend include:

• A copayment is a fixed charge for a specific service.
• The deductible is what you pay before your insurance kicks in.
• Coinsurance involves sharing costs with your insurer after meeting your deductible.
• The out-of-pocket maximum is the highest amount you’ll pay in a plan year, excluding premiums and certain services.

Employers might adjust plan terms, such as raising deductibles, to manage premium costs, which could lead to greater out-of-pocket expenses for employees. For context, last year, the average family deductible was $4,063, while individual coverage had an average of $2,085.

Optimize Health Accounts

It’s also important to assess potential out-of-pocket costs, allowing you to save adequately for health emergencies. Evans suggested building up savings specifically for such events.

One useful approach is to leverage professional medical accounts that employers may offer:

• A Flexible Spending Account (FSA) lets you use pre-tax dollars for qualifying medical expenses. However, funds generally must be used by the end of the year or risk forfeiture, though some carryover options might exist.
• A Health Savings Account (HSA) operates similarly, providing tax advantages. Contributions can grow tax-free if used for eligible medical costs. The limits for 2026 are $4,400 for individuals and $8,750 for families, plus an extra $1,000 for those over 55.

If you can avoid using your HSA funds for current expenses, they can accumulate to become a robust resource for future health needs, according to Emily Harper, a CFP at Monument Wealth Management.

Identifying Trade-offs

It’s crucial to review your budget and financial goals to find areas where adjustments could help manage healthcare costs. With rising expenses across the board—insurance, utilities, groceries—finding savings might be more challenging. Experts advise analyzing your spending before slashing retirement or savings contributions.

Dan Brown from KeyBank highlighted the importance of evaluating finances holistically, especially in light of rising inflation.

Adjusting your payroll tax withholding may improve cash flow, as noted by Harper. A tax refund often indicates overpayment throughout the year, and with changing tax laws, personal financial situations can vary significantly from year to year.