Both enrollment in health savings account (HSA)-eligible health plans and the number of HSAs have grown significantly since HSAs first became available in 2004; as a result, HSAs have become a significant part of employment-based health plans, according to an issue brief from the Employee Benefit Research Institute (EBRI).
EBRI noted that enrollment in high-deductible, HSA-eligible health plans in 2016 was estimated to be between 20.2 million to 22.6 million policyholders and their dependents. As many as one-quarter of smaller employers (10 to 499 employees) and 61% of larger employers (500 or more employees) offered an HSA-eligible health plan in 2016, covering nearly one in three workers with health insurance.
Similarly, there were an estimated 20 million HSAs holding $37 billion in assets as of the end of 2016. EBRI noted that this number could be even larger, as it has been estimated that 7.3 million HSA-eligible health plan enrollees had not opened an HSA.
Enrollment in HSA-eligible health plans is expected to continue to grow, according to EBRI. By 2019, 34% of employers with 10 to 499 employees and 72% of employers with 500 or more employees said they would be very likely to offer such a health plan.
EBRI’s brief analyzed data from the EBRI HSA Database, which contained 5.5 million accounts with total assets of $11.3 billion as of Dec. 31, 2016. Other the key findings include:
- HSA balances increased in 2016. Two-thirds of account holders ended 2016 with positive net contributions, meaning annual contributions were higher than annual distributions. Over 90% of HSAs with individual or employer contributions in 2016 ended the year with funds to roll over for future expenses. As of the end of 2016, the average HSA balance among account holders with individual or employer contributions in 2016 was $2,532, up from $1,604 at the beginning of the year. Only 3% of HSAs had invested assets (beyond cash).
- Contributions and distributions drive account balances. On average, individuals who made contributions in 2016 contributed $1,986 over the year and HSAs receiving employer contributions in 2016 received $935. But only 13% of account holders contributed the fully allowable annual amount.
- Three-fourths of HSAs with a 2016 contribution also had a distribution during 2016. Of the HSAs with distributions, the average amount distributed was $1,766, less than the average contribution, resulting in balance increases. The presence of individual or employer contributions were associated with an increase in account balances in 2016—even if account holders took a distribution.
- Investing does not maximize longer-term savings. Investors (beyond cash) had much higher account balances than noninvestors. EBRI noted that while it might be expected, individuals who invested their account balance were using the account solely as a long-term savings vehicle—the opposite appears to have been true. Both investors and noninvestors used the HSA to self-fund current uninsured medical expenses. Investors were more likely than noninvestors to take a distribution (69% and 63%, respectively). In fact, EBRI noted that when distributions were taken, investors took larger distributions ($2,451) than noninvestors ($1,740) during 2016. However, the larger distributions may have been because they had larger account balances.
EBRI closed the brief by stating that the data “provides an important window into account holder behaviors and trends. These trends can help plan sponsors and administrators tweak and craft anew the support systems for their health and financial wellness programs.”
However, it cautioned that when working to support account holders in self-funding uninsured medical expenses, plan sponsors and administrators should consider that most account holders do not maximize their annual contribution and do not invest their assets other than in cash. On the other hand, EBRI indicated that “longitudinal results from the EBRI HSA Database do show encouraging signs for future financial wellness for individuals the longer they have and contribute to an HSA. Over time, balances increase, contributions increase, and the percentage of accounts investing increases.”
A copy of the issue brief, Health Savings Account Balances, Contributions, Distributions, and Other Vital Statistics, 2016: Statistics from the EBRI HSA Database, is here.