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Financial Stress Is Impacting Workplace Benefit Choices

Author

Kimberly A. Landry
Research Director, Workplace Benefits Research
LIMRA and LOMA
klandry@limra.com

August 2026

U.S. workers in 2026 face a challenging economic environment. Inflation reached 4.2% in May, driven by increases in fuel and energy costs, while the consumer price index has risen roughly 25% since the beginning of 2020 — more than double the increase seen over the five years prior to that. At the same time, layoffs have grown to near-recession levels, reducing employees’ confidence in their job security and future income.

Financial Concerns

Recent LIMRA research confirms that employees are feeling a great deal of financial anxiety at the moment. Six in 10 workers are very or extremely concerned about the cost of living and inflation, while only 4% are not concerned at all (Figure 1). While concerns are most prevalent among low-income workers, even those with higher incomes are stressed, with almost a third of those earning above $250,000 per year very or extremely concerned about inflation. These worries also appear to be accelerating, with 70% of workers more concerned about the cost of living now compared to last year.

Figure 1. Employee Financial Concerns

Source: 2026 BEAT Study: Benefits and Employee Attitude Tracker, LIMRA, 2026

Employees are also stressed about rising benefit costs. Almost half of workers express concerns about the cost of healthcare and health insurance, which has increased substantially in recent years, while more than 4 in 10 are worried about their ability to save enough for retirement.

As costs rise, both within their benefits packages and elsewhere, employees may be hesitant to devote additional money to workplace benefits. Workers this year aim to spend a median of $150 per month out-of-pocket on benefits, excluding retirement savings, while the average is $254 per month — essentially unchanged from last year.

Reactions to Rising Medical Costs

Even as workers aim to keep benefit spending flat, rising medical costs are challenging their ability to do so. Over three-quarters of employees faced medical premium increases in 2026, with more than 4 in 10 seeing rate hikes greater than 5%.

Among workers who saw their medical premiums rise, half made changes to their spending habits in response (Figure 2). Most concerning for the workplace benefits industry were the 16% who reduced their spending on other benefits, the 9% who chose not to enroll in other benefits due to cost, and the 12% who reduced retirement savings contributions. While reducing benefits may help employees balance their budgets in the short term, it leaves them vulnerable to unexpected financial hardships.

Figure 2. Actions Taken in Response to Rising Medical Premiums

Based on employees enrolled in medical benefits through their employers who experienced a medical premium increase for 2026. Multiple responses allowed.

Source: 2026 BEAT Study: Benefits and Employee Attitude Tracker, LIMRA, 2026

The picture is worse for younger workers, who were the most likely to take action in response to medical premium rate hikes. Nearly three-quarters of Generation Z employees made changes when their medical premiums rose, compared to only 30% of Baby Boomers. Gen Z workers were also the most inclined to reduce their spending on other benefits.

Role of Nonmedical Benefits

Even as financial stress encourages employees to reduce their benefit spending, these same economic pressures make the need for benefits all too clear. Workers are ill-prepared for many of the financial challenges that nonmedical benefits are designed to combat.

For example, only 45% of employees have the resources to pay an unexpected medical bill of $2,000, while the rest would have to borrow or finance to cover such an expense. Many employees say they would set up a payment plan or carry a balance on a credit card to pay the bill — both strategies that could subject them to interest charges. Seven percent feel they would not be able to pay the bill at all.

Supplemental health benefits such as accident, critical illness, cancer, and hospital indemnity insurance play a critical role in helping employees cope with unexpected medical expenses. Clearly, more workers would benefit from having these protections. However, many of the demographic groups that are least prepared for unplanned medical bills — such as low-income workers, part-timers, and those who work for small businesses — are also less likely to be offered supplemental health benefits in the first place.

Employees also need benefits to protect against unexpected loss of income. Almost a third of workers say they would have immediate trouble paying living expenses if they became injured and unable to work, while nearly three-quarters would struggle within several months, highlighting the importance of disability insurance. Similarly, over half of employees say their households would struggle to pay living expenses within months if the breadwinner were to pass away unexpectedly, pointing to the crucial need for life insurance coverage.

As expected, those who are enrolled in disability or life insurance through the workplace feel somewhat more prepared to meet these financial challenges. However, it is noteworthy that at least 1 in 5 employees with these coverages still anticipate immediate financial difficulties if their households were to lose a breadwinner’s income, while even more predict long-term challenges. This implies that workers either have insufficient amounts of insurance protection or do not understand the coverages they have.

A Way Forward

Financial pressures are weighing heavily on U.S. employees, prompting some to cut back on nonmedical benefits that provide crucial protections. At the same time, workers have an obvious need for these products, with many employees financially vulnerable to unexpected medical bills or loss of income.

To encourage workers to maintain nonmedical benefits under these circumstances, the industry must ensure that employees understand and recognize the value of these products. Employee knowledge of nonmedical benefits tends to be low, but improves substantially with high-quality benefits education. By working with employers to provide benefits communication that is timely, relevant and easy to understand, carriers and other benefit providers can help to ensure that employees don’t react to current economic stress by making decisions that undermine their long-term financial security.

 

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