If you heed the mass media headlines and President Trump’s tweets, the U.S. has achieved “the best economy” ever in mid-July 2019. But if you’re working full time in that economy, you tend to feel much less positive about your personal prospects and fiscal fitness.
Nearly nine in 10 working Americans believe that medical costs will rise in the next few years as they pondering potential changes to the Affordable Care Act. The bottom line is that one-half of working people are more concerned about how they will save for future health care expenses.
That’s the over-arching theme in PwC’s 8th annual Employee Financial Wellness Survey for 2019, painting a financial stressed-out workforce of fully-employed people.
In this eighth year of the annual study, PwC tracked financial and retirement well-being of full-time working U.S. adults based on a poll conducted in January 2019. The N of 1,686 surveyed ranged from 18-22 years of age (Gen Z) through 59-75 (Baby Boomers).
The most prevalent stress in the American workforce is financial, far ahead of other causes like job, relationship, or health.
What’s driving financial stress for most workers is not having enough emergency savings for unexpected expenses (among 62% of Millennials, 55% of Gen X, and 44% of Boomers). For Boomers, not being able to retire “when I want to” hits 52% of these older workers most financially hard.
How do workers define financial wellness? First and foremost, it’s not feeling stressed about finances, followed by being debt-free, having enough savings so as not to worry about unexpected expenses, having the financial freedom to make choices to enjoy life, and being able to meet day-to-day expenses.
PwC quantified workers’ financial stress in a practical way by asking people if they had at least $1,000 saved to deal with unexpected expenses. 52% of Millennials did not, 43% of Gen X did not, and 31% of Boomers did not have that one grand saved to cover an unplanned cost that can happen in everyday life.
It’s no shock, then, to find that 59% of employees said they consistently carried balances on their credit cards in 2019, a huge jump from 49% who did so in 2018. By generation, 63% of Millennials carried card balances, 60% of Gen X and 51% of Boomers — the latter two older generational cohorts showing the biggest increases in carried card debt balances between 2018 and 2019 (12 points up for Gen X and 10 points up for Boomers).
Most U.S. workers across generations anticipate that healthcare costs will impact their retirement: 73% of Millennials believe so, 70% of Gen X’ers, and 61% of Boomers.
Only 39% of employed people are confident they will be able to cover medical costs in retirement.
It follows, then, that 2 in 3 workers say they plan to work in retirement or postpone retiring due to medical costs.
Sixty percent of workers with health insurance were covered by a health plan with a deductible (a HDHP). Four in ten insured workers contributed to a health savings account (HSA associated with their HDHP.
The HSA line chart shows that the share of employees contributing to their HSA has fallen from a high of 50% in 2017 to 38% in 2019.
Health Populi’s Hot Points: Last week, the IRS issued Notice 2019-45 to cover 14 new preventive care benefits that can be reimbursed by a high-deductible health plan without meeting the deductible amount.
The covered services are shown in the table to cover people managing prevalent chronic conditions: asthma, congestive heart failure, diabetes, heart disease, and hypertension, among others.
The covered services meet three pre-conditions:
- They are relatively low-cost
- They have supporting medical evidence demonstrating cost effectiveness and promote prevention
- They are likely to prevent the onset of conditions that would be more expensive to treat.
PwC found that fewer workers with access to health savings account were saving into them in 2019 compared with the previous two years.
HSAs offer a triple-tax advantage in that the (1) the initial savings amount from the worker’s paycheck are excluded from taxation; the growing balance over time is not subject to annual tax; and, (3) when withdrawn and used for medical spending, the monies aren’t taxed. Thus, HSAs as a savings vehicle are a very attractive option.
Nonetheless, Americans’ credit card balances are growing and savings rates stagnant, at best. As the last line chart illustrates, Americans’ personal savings rates fell from 7.6% in December 2018 to 6.2% in April 2019 based on the latest data from the St. Louis Federal Reserve. That’s the lowest savings rate in the U.S. in three years, as credit card balances continue to grow.
On the demand side, as I wrote in the chapter, “The Patient Is the Payor” in my book HealthConsuming, “Americans don’t save much.”
The HSA industry — call them the supply side of this equation — are enthusiastic about the latest IRS guidance broadening preventive care spending in HDHPs, echoed by this press release from HealthEquity, the largest HSA non-bank custodian in the U.S.
It will take some detailed explaining by the HSA community and employers for workers to understand the value of the expanding preventive care benefit for employees dealing with chronic conditions like diabetes and heart disease. In particular, there’s an opportunity for workers dealing with diabetes to lower the real out-of-pocket costs for insulin in this new rule. Physicians, other prescribers and pharmacists should be made aware of this, too, to help close the gap for patients-as-payors.
For more insights into the IRS HSA guidance, here’s a paper from the Center on Value-Based Insurance Design at my alma mater, the University of Michigan.