Workers lack savings buffer for unexpected medical costs

The cost of healthcare in retirement has been a theme in recent reports, but the sharp rise in medical-related costs is also a major issue for many Americans who are still working.

More than half of American workers who have experienced a recent medical event paid at least $1,000 out of pocket, yet fewer than three in ten say they feel prepared for an unexpected expense of that size.

New research from the Employee Benefit Research Institute (EBRI) and Lincoln Financial Group, expose a significant and growing gap between the healthcare costs employees actually face and the financial safety nets they have in place.

The study found that 47% of employees experienced at least moderate financial difficulty following a medical event, and 45% are still grappling with the financial fallout from past medical expenses.

More troubling still, 37% had a medical bill sent to collections, a figure that points to an escalating personal finance crisis hiding beneath the surface of the broader healthcare debate.

A burnout-finance connection

The research surfaces a clear link between employee burnout and financial vulnerability.

Among workers reporting at least one burnout symptom (56% of respondents) more than half experienced moderate to extreme financial difficulty stemming from medical events.

Among those without burnout, just 3% reported comparable hardship. That 51-percentage-point gap suggests that the mental and physical toll of overwork is compounding into economic fragility for millions of Americans.

The awareness gap in voluntary benefits

One of the study's most actionable findings for the advisor community involves voluntary benefits, such as critical illness insurance, hospital indemnity insurance, and accident insurance that can significantly reduce out-of-pocket exposure.

The research reveals a significant disconnect between employer offerings and employee awareness: 46% of employers report offering accident insurance, but only 28% of employees say they know they have access to it.

Understanding of these products is limited. Just 40% of workers say they have a high understanding of critical illness insurance, and only 35% report strong familiarity with hospital indemnity insurance, compared to 54% who feel confident about their health insurance coverage.

However, when employees were given plain-language descriptions of these products, interest rose sharply.

Seventy-six percent expressed interest in critical illness insurance, 71% in accident insurance, and 63% in hospital indemnity coverage. Among the roughly half who had delayed or avoided care due to cost with 26% doing so within the past year, the case for supplemental coverage is particularly clear.

Enrollment tells a different story when employees engage

Where employees do enroll in voluntary products, adoption is relatively strong.

Among workers with access to accident insurance, 70% enrolled. The figure stands at 61% for hospital indemnity and 53% for critical illness insurance. And 57% of enrollees across all three product types described their coverage as very important to their financial security.

That pattern of low awareness leading to low uptake, but high satisfaction once enrolled, points to a communication and education deficit rather than a product problem.

The EBRI-Lincoln Financial data arrives at a moment when the advisory profession is revisiting what comprehensive financial planning actually means.

With more than half of workers delaying medical care because of cost, and a substantial share carrying medical debt into collections, the emergency fund conversation (traditionally focused on job loss) must increasingly account for healthcare disruption.