We’ve all seen the numbers: Health savings accounts just keep growing.
The still relatively new health savings vehicle has now grown to an estimated $18.1 billion in assets representing more than 9.1 million accounts. That’s a 29 percent increase in both accounts and assets in just one year, according to research from investment consulting firm Devenir.
Devenir said the average account balance continues gradual growth. The average balance halfway through 2013 grew to $1,981 from $1,879 at the end 2012, roughly a 5 percent increase.
HSA contributions also are rising sharply. Total contributions to HSA accounts from June 2012 to June 2013 are estimated to have reached $16.7 billion, with accountholders retaining about 23 percent of those contributions.
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HSA investment assets reached an estimated $2 billion in June, up 14 percent from the end of 2012 and 26 percent year over year. The average investment account holder has a $10,484 average total balance (deposit and investment account).
There’s no question that HSAs are growing — but why? Experts point to a number of possible explanations.
High health care costs
Despite reports health care spending is slowing down, health costs remain incredibly high. A new report from the Kaiser Family Foundation confirms long-held suspicions that the cost of employer-sponsored health coverage continues to rise at a faster rate than wage increases and inflation.
Annual premiums for employer-sponsored family coverage climbed nearly 4 percent this year to top $16,000 for the first time, Kaiser found. The cost of single coverage rose almost 5 percent. Worker wages, meanwhile, climbed nearly 2 percent on average.
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Health savings accounts are seen as a way for employers — and employees — to combat those high health costs.
“[HSAs] are becoming more popular with employers because they have a much more sustainable expense profile and help lower employee benefit costs,” says Duncan Van Dusen, CEO of Tango Health in Austin, Texas.
Plus, Van Dusen says, “as premium costs and deductibles continue to increase, more and more consumers realize they fare better with a slightly higher deductible and a much lower premium.”
Many employers offer an HSA paired with a high-deductible health plan, according to the Employee Benefit Research Institute, and it’s saving them a bundle on premiums.
EBRI analyzed detailed claims data over a five-year period from a large Midwestern employer that adopted a high-deductible health plan with a health savings account for all employees in place of its traditional health care offering.
The result? Total health care spending for the employer fell by 25 percent the first year, or $527 per person in the aggregate.
The rebounding economy could be partly responsible for the surge of at least one aspect of HSAs.
As the economy has rebounded, HSA contribution levels have risen, too, says EBRI Director Paul Fronstein.
According to EBRI stats, roughly 70 percent of workers with a health reimbursement account or a health savings account said their employers contributed to the account last year, continuing a steady increase since 2009.
There was a drop in the accounts during the recent recession, as average account balances leveled off in 2008 and 2009 and fell slightly in 2010. But they have been picking back up in 2011 and 2012, Fronstein says.
Plus, with more contributions from employers, employees might be more apt to use them, and to contribute themselves.
According to EBRI, employer contributions of $200−$499 increased from 14 percent to 22 percent between 2009 and 2011, while employers that contributed $1,000 or more increased from 24 percent to 28 percent. Among workers with family coverage, employer contribution levels were unchanged between 2010 and 2012, with 63 percent contributing $1,000 or more.
Increasing consumer involvement
One big draw of health savings accounts — and other consumer-driven health products — is they make consumers more active in their health care.
“HSAs get consumers more involved in their health care, especially if they are properly educated and use some of the newer transparency resources in the marketplace,” says Nick Severino, director of marketing for Chicago-based Flexible Benefit Service Corporation.
And more consumer involvement is good news for every party involved, insiders say.
It can save on health care woes in the long-term because CDHP customers are more likely to visit the doctor and get problems fixed before they even begin: CDHP customers sought preventive care, such as annual office visits and mammograms, more frequently than customers enrolled in a traditional plan, according to research from Cigna.
They also were more likely to participate in wellness programs and health assessments, and 59 percent more likely to access cost and procedure information to help them review potential medical costs.
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