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HSA Holders Spent Less on Doctors, More on Drugs Amid Pandemic: Study

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When reviewing client outflows, especially for older clients, advisors should have a firm idea where most of the spending is going. This is especially true during the COVID-19 pandemic that ushered in volatile health care insurance premiums and changes in how people spent and saved.

A recent report by Lively Inc., a provider of health savings accounts, sifted through spending data of 50,000 account holders, comparing spending habits between 2019 and 2020. They found some interesting shifts in health care spending.

Out-of-pocket health care expenses account for about 11% of all health care expenses for HSA holders, which equates to about 38% of all household spending, states the study.

Health care spending fell in 2020 compared with 2019 for routine visits to the doctor’s office (-3%), hospital visits (-9%), lab work (-15%) and dental spending (-9%).

Those areas where spending increased: prescription drug purchases (+32%) and chiropractic care (+20%). Also, the average annual premium for health care rose 4% from 2019 to 2020.

One reason given for the increase in drug purchases included a rise in anti-anxiety, anti-depression and sleep medication orders, especially as the stay-at-home orders were extended, according to the study authors.

“COVID-19 has left millions of Americans feeling uncertain about their financial futures. Many have had to dip into their long-term savings to stay afloat,” said Shobin Uralil, chief operating officer and co-founder of Lively, in a statement.

“While HSA account holders may have spent their money differently to adapt to the pandemic [in 2020], rising health care costs are still making it tough to save for things like retirement.”

In fact, one finding was that HSA account holders are spending and not saving. The study noted that 86% of annual HSA spending was due to expected medical costs, prescription drugs and routine visits.

And despite the rise in some prescription drug purchases, mental health spending remained steady year to year, the study found. However there was an increase to 16.3% in 2020 from 15% in 2019 of virtual mental health experiences.

The study concluded that “COVID-19’s influence on 2020 HSA spending and healthcare costs was significant. The impact of COVID-19 on 2021 premiums ranges from a 3.4% decrease to an 8.4% increase. The volatility has employers and employees seeking ways to cut the costs of fixed expenses, adding more pressure on the average American consumer who spends their savings on everyday health expenses.”

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