HSAs march ever higher, expected to continue
Health savings accounts continue surging on all fronts. The number of accounts grew 13% over the past year to top 25 million while assets grew 19% to $53.8 billion, according to research firm Devenir.
Looking further, Devenir projects the number of HSAs to hit 30 million by 2020, with $75 billion in total assets and $16.7 billion in investment assets.
One reason the HSA market is surging stems from employers’ cost-cutting moves, says Jon Robb, senior vice president of research and technology at Devenir. Indeed, these accounts are tied to high-deductible health plans, which also are on the rise among U.S. employers. According to the Society for Human Resource Management, 70% of employers offered at least one HDHP option in 2018, up from 58% in just two years.
One particularly encouraging HSA metric, Robb says, is an increase in employer contributions. Those payments had been trending downward in recent years, but increased again in 2018.
Indeed, the average employer contribution rose to $839 last year, up 39% from $604 in 2017. All told, employer contributions totaled almost $9 billion last year.
Meanwhile, investment assets in HSAs increased 22% to $10.2 billion in 2018.
HSAs have been making news lately with Amazon’s decision to allow consumers to use the accounts to buy thousands of items on its site, a move that was ballyhooed as a positive for HSA customers, as well as Amazon.
“By accepting HSA dollars, Amazon is finally giving this untapped savings tool its moment to shine,” David Vivero, co-founder and CEO at Amino, an employee financial wellness platform, wrote in an EBN opinion piece. “Every payment method or currency — whether it’s dollars, airline miles, bitcoins or credit cards — depends on reliable large-scale merchant acceptance to become truly mainstream.”
Amazon’s chief competitor, Walmart, allows consumers to use HSA and FSA cards to purchase medical items, as well.
Despite growth in the HSA space, there are some impediments to success: For instance, recent research from Willis Towers Watson suggests many HSA customers still do not know how to make full use of their tax-free and long-term savings features.
Almost two in three workers (65%) are tapping their HSAs to pay for immediate healthcare expenses with only a modest 8% saving the money for the future, a survey by the consulting firm found.
That’s an opportunity for benefits professionals, who might consider beefing up education efforts about the positives of such accounts.
One benefit that may not be immediately intuitive will come in helping seniors avoid bankruptcy, Robb says. “One of the biggest reasons people file bankruptcy in later years is healthcare costs. [HSAs] can help pay those costs.”