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October 13, 2013

HSAs Surge in Popularity

Nearly 15.5 million Americans are now covered by Health Savings Accounts, an increase of 15% from last year, according to a new census just released by America’s Health Insurance Plans. Meanwhile, HSAs have grown to an estimated $18 billion in assets representing over 9.1 million separate accounts, according to the 6th semiannual Health Savings Accounts Survey by Deviner.

“Both employers and employees contributed record amounts to HSAs over the last year, with large employers in particular making significant contributions to their employee’s HAS accounts in an effort to help drive adoption,” said Jon Robb, vice president of research at Devenir.

The America’s Health Insurance Plans census

Health Savings Accounts were originally authorized by Congress in January 2004 with the intent of forcing consumers to get smarter about their healthcare spending. The hope was that HSAs would help control medical inflation by discouraging Americans from running to their local doctor or emergency room for every medical issue that might occur.

Since that time, America’s Health Insurance Plans has conducted an annual census of the number of people covered by HSAs and high-deductible health plans. The most recent census reveals that enrollment in HSA plans has more than tripled over the last six years.

The census also reveals that the greatest enrollment increases were in the large group market, which represents nearly 70% of all enrollments in these plans.

“Health Savings Accounts and the high-deductible health plans that are paired with them are an increasingly popular choice for individuals, families and employers,” said Clare Krusing, deputy press secretary for America’s Health Insurance Plans. “This coverage option provides individuals with a comprehensive health insurance plan, while also giving them the opportunity to save tax-deferred funds for qualified medical expenses, such as doctor visits and prescription drugs.”

HSAs are intended to be used in conjunction with qualified high-deductible health plans, Krusing said.  In order to quality, such health plans must currently have a minimum deductible of $1,200 for single coverage and $2,400 for family coverage.

“Consumers, family members, and employers can make deposits into a tax-favored account for qualified medical expenses. Funds not withdrawn for ‘qualified’ health expenses can remain in the account and be rolled over annually to build savings for future health-related costs,” she said..

Data from America’s Health Insurance Plans also revealed that the states with the highest level of Health Savings Accounts and high deductible health plans are Illinois (with 903,000 enrollees); Texas (with 889,364 enrollees); California (with 808,019 enrollees); and Michigan (with 577,208 enrollees).

The census report also revealed that the majority of those individuals that are enrolled in an HSA plan have access to a wide variety of tools and resources to help them manage the plan, including information for selecting appropriate providers and hospitals.

“HSA plans provide quality care coverage and are meeting the needs of different ages, health statuses and socioeconomic backgrounds,” Krusing said “They particularly plan a vital role in providing healthcare to millions of Americans who might otherwise be uninsured. In the initial years following the authorization of HSA plans, a report found that 27% of those buying HSA plans in the individual market previously did not have health insurance.” 

The Devenir Health Savings Accounts survey

Meanwhile, the semi-annual survey on Health Savings Accounts by Devenir finds that contributions to the plans continue to rise. “We saw pretty consistent contributions to these accounts even during the rough economic period,  but the movement has really taken off recently,” Rob said.

Devenir’s survey data was collected in July 2013 from approximately 50 providers in the Health Savings Accounts market. Key findings from the study reveal that:

  • The total number of accounts rose to more than 9.1 million, with assets totaling $18.1 billion. This represented a 29% increase from one year ago;
  • The average account balance halfway through 2013 grew to $1,981 from $1,879 from the same time last year, a 5% increase;
  • The average investment account holder (a deposit and investment account) has a $10,484 account balance;
  • Total contributions to HSA accounts reached $16.7 billion, with accountholders retaining approximately 23% of those contributions; and
  • Total HSA investment assets reached an estimated $2 billion in June, up 14% from the end of 2012, and up 26% from one year ago.

Looking ahead, Devenir President Eric Remjeska sees the increased adoption of Health Savings Accounts continuing. He says that as long as one has a high deductible health insurance plan, HSAs offer a great way to set aside money for healthcare in a tax-deferred manner.

“It’s a triple tax free benefit,” Remjeska said. Also, “the advantages from a usage standpoint are that, typically, the accounts have a lot of typical savings and investment account type features to them. Typically they’re accessed online; typically they come with a debit or credit card; typically they have bill pay functionality with them; and typically then have some sort of investment vehicle associated with them.”

The obvious disadvantage is that to qualify you must have a high deductible health insurance plan to begin with. “Otherwise, they do act and function much like a typical checking or savings account, with the investment component added in,” he said.

This content has been developed by a third party not affiliated with Nationwide Financial and is made available for informational purposes only. This information does not constitute a recommendation nor should be construed as a solicitation to purchase any investment product. Nationwide Financial and Summit Professional Networks are non-affiliated companies. Nationwide, Nationwide Financial and the Nationwide framemark are service marks of Nationwide Mutual Insurance Company. ©2014 Nationwide Financial Services, Inc. All rights reserved.

NFV-0781AO

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