Americans Must Make Difficult Health & Financial Well-Being Tradeoffs

Increasingly, American families must compromise on their well-being to stay financially afloat. The challenges are especially acute for those earning under the median household income, which is roughly $75,000 per year. People below this threshold are more likely to report challenges managing unexpected and expected expenses, a lack of long-term financial planning, higher levels of stress, and poorer social connections.

Assurance IQ’s report, Financial Well-Being 2024: The Challenges & Sacrifices Facing American Households dives into how Americans, especially people in households earning less than $75,000, manage necessary tradeoffs while trying to build a safety net for their family’s well-being and financial security. The report includes data from a survey of 5,000 American adults.

Healthcare is expensive—and insurance is too confusing to be the safety net people need

Health and financial well-being are closely intertwined: medical debt is the leading cause of bankruptcy in the US. But nearly half (46%) of Americans say they avoided medical care in the past year due to costs. People skipped care because:

• They weren’t sure if they could afford it (56%)
• They weren’t sure if it was covered by insurance (41%)
• And they didn’t want their insurance costs to go up (26%).

Younger adults and lower income consumers are more likely to have done this, with 67% of Gen Z and 62% of millennials saying they avoided seeking care due to cost. But even among those earning more than $150,000 per year, 39% did so.

Across all income groups, people experience confusion around health insurance. Higher earners with $150,000+ incomes are just as likely (60%) to say they had to pay for an unexpected medical expense in the past year as people earning between $50,000 and $75,000. And nearly two thirds (65%) of Americans say they are not completely certain what their health insurance deductible is, indicating they likely don’t have enough information to plan appropriately for out-of-pocket costs.

Americans might not be making ideal choices that minimize out-of-pocket costs when enrolling in health insurance plans. However, higher earners are better positioned to manage unexpected medical expenses.

• More than three quarters (77%) of those earning over $150,000 say they could cover most or all of their health deductible with their current savings, compared to just 46% of those earning under $75,000. 19% of those earning below median would not be able to cover any of their deductible.
• For Americans earning under $75,000, just over a quarter (27%) would be able to cover $250 or less for an unexpected medical expense without impacting their ability to pay monthly bills, and 25% would not be able to cover anything at all (compared to 8% of those earning more who said they would not be able to pay for it).

Receiving an unexpected bill can set off an endless cycle where people end up in debt, and may be afraid to seek further care, for fear of unaffordable costs. Of Americans who had to cover an unexpected medical expense in the past year:

• 64% also say they avoided care due to the cost (vs. just 19% of those who did not have to pay an unexpected medical expense)
• 43% used a credit card to cover the unexpected expense
• 42% cut back on day-to-day spending
• 21% worked additional hours
• 20% missed other bill payments
• 12% had to take out a loan.

Skipping care can have an even greater ripple effect on a family’s finances and mental health. Of those who avoided care in the past year, 47% say they feel very or extremely stressed compared to just 17% of those who did not avoid care due to cost.

It’s no surprise then that nearly one third (31%) of Americans feel they do not have sufficient health insurance coverage, and nearly half (48%) feel they are overpaying for health insurance, but it is too difficult to understand what they need.

The long-term planning gap

While medical costs might eat away at a family’s savings, many Americans also face longer-term challenges when it comes to financial security. Many people have not taken steps to plan for emergencies that could devastate their finances. A death in the family, for example, can be financially catastrophic. If a breadwinner passes away, a family might not be able to maintain their mortgage or rent payments. If a caregiver passes away, suddenly the cost of care is a fresh burden. A funeral and burial can also be costly.

Most Americans (56%) are concerned that their family would not be able to maintain their standard of living if they were to die. This level of concern roughly persists across all income levels. However, there’s a significant gap in financial planning around death among lower income consumers with household incomes under $75,000 compared to their higher earning counterparts.

Here’s a snapshot of the steps people have taken to prepare:

• Created a will: Only 33% of Americans earning under $75,000 have done this, compared to 49% of higher earners. 
• Set aside savings to cover final expenses: Only 20% of those earning under $75,000 have done this, compared to 32% of those earning more.
• Purchased life insurance: Around 30% of those earning under $75,000 have bought life insurance, compared to 48% of higher earners. 
• No plans: 35% of people earning under $75,000 have made no plans, compared to just 18% of those earning more.

“This research indicates that for too many Americans, personalized support around end-of-life planning is likely out of reach,” said Allison Arzeno, CEO of Assurance IQ. “Financial advisors tend to prioritize clients with significant assets, which leaves lower income Americans to figure out a complex financial system on their own. Not having a safety net can cause a family to cycle in and out of poverty and prevent them from creating financial stability.”

Another Assurance IQ survey of US adults found that nearly half (47%) of Americans earning under $50,000 per year do not receive any professional financial guidance, and those who do tend to rely on free sources like advice from their bank, professionals on social media, online personal finance publications, and social and community services.

Financial instability prevents families from moving forward financially 

While unexpected events like medical emergencies or a death in the family can thrust a family into poverty, managing expected expenses can also be challenging for people who struggle to allocate their low income.

In the past year, 75% of Americans earning under $75,000 have had to make tradeoffs to pay their monthly bills (compared to 58% of those earning more). Those tradeoffs included:

• Borrowed money or used a credit card (46%)
• Paid a bill late (47%)
• Skipped meals (31%)
• Sold possessions (27%)
• Overdrew bank account (28%)
• Negotiated payment terms (25%)
• Cancelled or decreased insurance coverages (9%)

Economic instability can trap families in a perpetual cycle that prevents them from building up savings. Around 21% of Americans anticipate their finances will become less predictable in the next three years, including a quarter (25%) of those earning under $50,000. Around half of those who said their financial stability will be less predictable in the next three years had to make tradeoffs like borrowing money or using a credit card to pay bills (50%) or paying a bill late (48%) in the past year. That’s compared to 38% and 35%, respectively, of those who said their financial stability will be the same or more predictable in the next three years.

Economic instability can keep a family teetering on the edge of poverty, even if they don’t face a health emergency or a crisis like a death in the family. There are many factors that contribute to instability, including irregular unemployment and fluctuating work schedules. The US Financial Diaries, a study that uncovered just how common volatile monthly income is, spotlighted just how significant varying work hours can be on a family’s financial stability.

“The popular focus on annual incomes or even monthly budgets hides arguably the biggest financial challenge for many families, which is incomes that are unstable and unpredictable month-to-month because of how jobs have changed,” said Timothy Ogden, managing director of the Financial Access Initiative at NYU Wagner and a leader of the US Financial Diaries study. “When low-income families are able to put aside some savings, often those savings are spent within a few months to cover an unexpected cut in hours.”

Other events that contribute to a family’s economic instability include change in public benefits, frequent moves and members leaving or entering the household.

Insurance can be a tool that helps families remain resilient in the face of crises.

Finding and choosing the right insurance to protect what matters most can be overwhelming. For example, the average Medicare beneficiary had dozens of plans to choose from during the most recent open enrollment. The average person shopping for health insurance through a government exchange, like http://Healthcare.gov , had more than 100 options available to them for 2024. Consumers need to carefully consider things like which doctors, specialists and prescriptions they need covered, how often they seek care, and what they can afford in terms of out-of-pocket expenses. 

When it comes to life, home and auto insurance, policies can be complex and nuanced, leaving consumers unsure of the right choice. A higher deductible on a home or auto policy, for example, can lower monthly costs in the short term but leave a family unprotected when an accident happens. Buying the wrong life insurance can leave someone with premiums they can’t afford, and they may ultimately let the policy lapse.

“Someone who is emotionally exhausted from struggling to make ends meet doesn’t have time to analyze a dense, lengthy insurance policy,” said Arzeno. “We need a more equitable system, where people at all income levels have access to personalized guidance that empowers them to build a safety net for their family. With modern technology, the insurance industry can more easily reach underserved consumers and tailor recommendations to meet their unique needs.”

Read the full report: Dive deeper into the well-being challenges facing Americans earning under $75,000. Download Financial Well-Being 2024: The Challenges & Sacrifices Facing American Households.

This survey was commissioned by Assurance IQ and conducted by Wakefield Research among 5,000 nationally representative US adults ages 18+, between December 7th and December 20th, 2023, using an email invitation and an online survey. Data has been weighted.

Results of any sample are subject to sampling variation. The magnitude of the variation is measurable and is affected by the number of interviews and the level of the percentages expressing the results. For the interviews conducted in this particular study, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 1.4 percentage points from the result that would be obtained if interviews had been conducted with all persons in the universe represented by the sample.

Research from this survey was supplemented in this blog post with findings from a survey of 1,165 US adults aged 18 and up conducted from January 26 to 29, 2024. The data were weighted to the US population by 10 demographic questions. The credibility interval for questions answered by all respondents is plus or minus 4 percentage points. This survey asked Americans if they receive professional financial guidance.