Consumers Maintaining Positive Health Savings Accounts

December 05, 2018 - Today, there are more than 23.4 million health savings accounts (HSAs) across the country, with assets of more than $51 billion, according to the 2018 Midyear Devenir Report.

“We are continuing to see a growing market for HSAs, and with that comes a responsibility to provide education on accountholder behaviors,” said Ben Morris, president of UMB Healthcare Services. “Aggregated segmentation data can provide insights into employee population behavior that can help our clients deliver benefit strategies that will influence positive employee health decisions, engagement and financial wellness.”

Savers — that is, UMB accountholders whose HSA balance was greater than the amount spent — represent the largest segment for the sixth consecutive year. These same individuals on average have had accounts opened for at least two years. Funded accounts typically have balances north of $2,000 and receive $441 in annual contributions from employers.

To obtain the benefits of an HSA, the law requires that the savings account be combined with a qualified high deductible health insurance plan which can cost less than other health insurance plans. An HSA is a tax-favored savings account created for the purpose of paying medical expenses.

“Employees enrolled in an HSA-eligible health plan get the care they need, have lower health care costs, and – most importantly – do a good job maintaining their health,” Tracy Watts, Mercer Senior Partner, told the Joint Economic Committee in June.

Testifying at a hearing on behalf of the American Benefits Council and Mercer, Watts highlighted the findings from Mercer’s most recent National Survey of Employer-Sponsored Health Plans and described some employer case studies demonstrating the upside of HSAs and other “consumer-directed health plans,” which now cover one-third of all American workers at large companies (those with 500 or more employees).

“The data showed us that the utilization of health care was quite similar across the two groups,” Watts said when comparing a traditional PPO plan and an HSA-eligible plan. “When we looked at the two groups over the three-year period, the HSA-eligible plan participants maintained their health status, while those in the PPO plan saw [on average] an 8 percent increase in identified health risks.”

Slow to gain traction at first, HSAs are growing increasingly popular — especially as the availability of high-deductible health plans (HDHPs) steadily rise — according to DataPath. Thirteen years after HSA implementation, HDHP growth is staggering, as is HSA adoption. HSAs are popular primarily because they offer triple tax savings. Account holders make pre-tax contributions from their paychecks, withdrawals made from the account for eligible medical expenses are tax-free, and interest and investment income earned on the account is tax-free.

HSA funds also can be used for a wide range of medical expenses approved by the Internal Revenue Service, which goes a long way toward helping make healthcare more affordable.

Furthermore, unlike other employer-sponsored benefit accounts, the individual owns the HSA forever — there’s no forfeiture of funds if the account holder retires or leaves the company. Another benefit is that after age 65 account holders can use their HSA for any expense without penalty, though withdrawals are taxed if not used for medical expenses. So an HSA can be used as a quasi-retirement account, if the account holder chooses.

As in previous years, the majority of HSA members are enrolled in an account through a large employer. According to data published by America's Health Insurance Plans (AHIP), the majority of HSA members (approximately 82%) were enrolled in the large-group market in 2017.

“With a majority of enrollees decades away from retirement, these accounts serve as tax-advantaged savings tools to prepare for medical costs during retirement,” AHIP asserted.

Eighty-eight percent of payers allow beneficiaries to manage their HSA information and 82 percent of payers provide members with healthcare cost information.

Payers also provide HDHP enrollees with quality data on providers to help members choose the best possible healthcare options. Seventy-percent of payers shared hospital quality data with HDHP enrollees and 69 percent shared provider quality data.

Many payers are capitalizing on the opportunity to use financial planning and decision support tools to engage people with HSAs and HDHPs.