The connection between money and health

Health savings pathways, a 3-part series

As an employer benefits team, you’re invested in the overall well-being of your employees as much as your organization’s success. That makes your employee benefits strategy — including health plans, health benefits accounts, HSAs and more — one of your greatest assets.

In 2022, Optum Financial conducted research that showed almost half of employers consider value to employees when deciding which benefits to offer. And when it comes to return on investment, most employers consider if a benefit is used and if it attracts and retains talent.¹

So how can employers continually offer benefits that help employees live well — and work well? It starts with a commitment to understanding the evolving needs of individuals and families.

In this 3-part series, we’ll explore the wellness challenges employees face, the real results employers can achieve through their benefits strategy and the best practices employers can use to optimize their approach to health and wellness benefits.

Part 1: The wellness challenges individuals and families face

To stay competitive, your employer benefits must continually adapt to support each employee’s unpredictable journey of life situations and health scenarios.

Recent studies show that each individual’s well-being is an intricate balance of physical, mental and financial health, which changes and evolves over time.² Because of this balance, and because health isn’t always linear, stress in one area may affect other aspects of wellness.

Individuals and families are continually dealing with outside factors that can significantly impact wellness, specifically the complex relationship between money and health. This relationship is shaped by the:

• Cost of health care
• Impact of financial stress
• Intertwined connection of the two

Health care costs are trending up

Inflation in a post-COVID world is reaching all areas of the economy across all income brackets. Individuals and families feel growing stress about paying for necessary expenses, including health care.

In 2022, the consumer price index rose more than 8% across all spending categories. Some categories saw even larger jumps, such as food (13%), gasoline (18%) and health insurance (28%).³

But inflation isn’t the only factor that’s been raising the cost of health care over the past few decades.⁴

Notably, health care costs have been going up due to the rapidly aging U.S. population. Increased demand from older adults needing care for chronic conditions impacts the entire health care system, from providers and health plans to employers, individuals and families.

Technological advances also drive costs by creating treatments that are more effective but more expensive. For example, prescription drug prices have seen a substantial increase in recent years due to extensive research and development.

Health insurance cost increases aren’t expected to stop rising anytime soon. McKinsey & Company estimates health care costs will be $370 billion higher than pre-pandemic levels by 2027.⁵

McKinsey also estimates that employers could see an extra 9–10% increase in their health insurance premiums by 2025.

If that happens, employers will be faced with the decision to absorb costs or pass more costs on to employees by:

• Increasing the percentage of the overall health plan premium the employee pays
• Changing to high-deductible health plans
• Reducing other various benefits⁵

Financial stress shows up in the workplace

The effects of inflation reach beyond wallets, impacting employee wellness — and their employers’ wellness too.

Difficulty affording health care can lead to individuals and families quickly feeling extra financial and mental stress. And as rising costs make care harder to access, the toll on overall health can greatly impact employee performance at work.

According to a 2023 MetLife study, almost 50% of employees cited money worries as the cause of their low mental health, up from 31% in 2022.²

These money worries are widespread. In fact, 63% of Americans across all income brackets reported living paycheck to paycheck and not having enough money to pay for future expenses until their next payday.⁶

In addition to feeling financial stress in their mental and physical health, employees also report that it has a considerable impact on their sleep, self-esteem and relationships at home.⁷

There's more. The 2023 PwC Employee Financial Wellness Survey found that poor holistic health shows up at work as well. It affects employee attendance, productivity and even retention.

In this study, financially stressed employees were twice as likely to look for a new job compared with their more confident peers.

Employee distress may not always be easy to see, as 41% of financially stressed employees also reported being embarrassed to ask for help.⁷ Various fears or stigmas may keep individuals from speaking openly about their experiences.

Employers should be mindful of significantly misjudging their employees’ well-being. In 2023, 83% of employers perceived their workers to be financially well, an overestimation of 28 percentage points.²

Staying connected to your employees makes a big difference in supporting a healthier workplace. Understanding their needs helps identify ways to promote wellness in all areas of your employees’ lives.

Avoiding care for fear of costs can lead to serious consequences. Skipping regular screenings, for example, can result in delayed detection of conditions such as cancer. That can mean worse outcomes — and even bigger bills — down the line. This cycle can go on and on.

Better financial health links to better overall health

Your organization and employees will continue to face increases in health care costs and financial stress. As you develop your benefit strategy, you can help your employees live well by making decisions that account for the connection between money and health.

No matter the situation, people are more likely to make healthier choices when they feel confident they can afford the care they need. They gain that confidence by understanding their health and wellness benefits and what those benefits offer at various points on their path.

In part 2 of the health savings pathways series, we’ll share our research on the employer benefit strategies that support positive behaviors and better health outcomes for your employees.