EBRI’s First Look at HSA Account Balances and Distributions
The Employee Benefits Research Institute has just published its first analysis of HSA accounts, balances, and distributions, based on its own HSA database. This is an excellent report, in part because it also looks at other similar reports and discusses the strengths and weaknesses of each.
It is well worth downloading and saving the entire report and using it as a baseline to watch the growth of HSAs over the coming years.
Here are some of the bullet points –
- This year marks the 10th anniversary of the creation of health savings accounts (HSAs) under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.
- Starting from scratch a decade ago enrollment in HSA-eligible health plans is estimated to range from 15.5 million to 20.4 million policyholders and their dependents, and it has also been estimated that there are 10.7 million accounts holding $19.3 billion in assets as of Dec. 31, 2013. Seventy percent of HSAs were opened since 2011.
- The average HSA balance at the end of 2013 was $1,766, up from $1,280 at the beginning of the year. Average account balances increased with the age of the owner of the account. Account balances averaged $697 for owners under age 25 and $4,460 for owners ages 65 and older.
- HSAs with either individual or employer contributions accounted for 69 percent of all accounts and 87 percent of the assets. Six percent of these accounts ended the year with a zero balance.
- On average, individuals who made contributions deposited $2,032 to their account. HSAs receiving employer contributions received $1,184, on average.
- Four-fifths of HSAs with a contribution also had a distribution for a healthcare claim during 2013.
- Among HSAs with claims, the average amount distributed for healthcare claims was $1,953.
- Distributions for healthcare claims increased with age, with the exception of those ages 65 and older. Average annual distributions were $667 for account owners under age 25; $2,335 for account owners ages 55-64; and $2,017 for account owners ages 65 and older. Average annual distributions were higher for accounts that were older. However, the likelihood of taking a distribution for health care claims was higher among accounts opened more recently.
- HSAs are likely to keep growing: It is expected that 30 percent of larger employers will offer an HSA-eligible health plan or HRA as the only plan option by 2015.
EBRI also reports that HSA enrollment grew a whopping 16 percent from 2012 to 2013 and expects that by 2016 HSAs will be offered by 78% of large (over 5,000 employees), 64% of medium (500 + employees), and 34% of small (10-499 employees) employers.
Proponents hoped (and opponents feared) that HSAs would take off immediately. Rapid growth starting from a small base takes time. Despite the ACA, it appears that HSAs will continue to grow. It would not surprise me to see that in another 10 years HSAs become half the market simply because it’s a natural response for employers to raise deductibles to lower costs. Once deductible are higher, an account is needed to budget for the normal health care needs. As more employer raise deductibles, many will also experiment with substituting HSA contribution for first-dollar coverage.
I hope (and think) you’re right Devon. Employers and soon employees are beginning to think more rationally about health insurance and are coming to the conclusion that HSAs make complete sense.
Health insurance was designed for catastrophes, not routine care. But insurance has incentivized us to use it for everything, and prices have gone through the roof as a result.
Whole Foods has tried HSAs, with great success.
http://www.youtube.com/watch?v=3WnS96NVlMI&feature=kp
The fact that HSAs are growing so rapidly, especially in the light of Obamacare fervor among those preaching single-payer, is evidence of their success.
“EBRI also reports that HSA enrollment grew a whopping 16 percent from 2012 to 2013 and expects that by 2016 HSAs will be offered by 78% of large (over 5,000 employees), 64% of medium (500 + employees), and 34% of small (10-499 employees) employers.”
One can only hope. After all, have you ever wondered what would happen if we had insurance for other types of products, such as food at grocery stores. No shopper would ever bother to concern themselves with the cost of food so long as they only had to pay a small uniform copay. Well, that’s also what happens with health insurance. Costs will continue to skyrocket as a result, and, like Devon noted, the natural response is to move toward a more common-sense market solution that incentivizes smart decision-making…HSAs, in other words.
Imagine an HSA type account which grows at 8 percent per month and each contribution increases 8 percent pet month until it caps at 300 percent per month
Imagine increasing the deductibles much faster for the account grows faster than a savings account and deductibles are not limited by law
The result is Health Matching Insurance a patented product through National Prosperity Life and Health
We look for approval through the Texas Dept of Insurance in July
Finally, a system that allows purchasers to treat health insurance as an asset of theirs instead of as an obligatory employer-provided benefit that allows for no portability when changing jobs.
ObamaCare makes things worse. HSAs, combined with insurance for only the costliest of medical needs, are a huge step toward curing America’s healthcare system.
The old distribution channel of brokers impeded the growth of HSAs.An agent paid a percentage of the price, like the brokers, is clearly motivated to sell somethign with a big price tag ,rather than something with a smaller one.
The advent of exchanges which market directly to consumers ,and the state of the economy ,help to explain the acceleration in the growth of HSAs.
I have always suspected that Human Resource Directors were an early obstacle to HSA adoption by employers. HR directors tend to be middle-age, with families. In other words, to some degree company health plans tend to reveal the preferences of the HR managers (and their families), and their fellow managers — until that became unsustainable.
I came to this conclusion after trekking across the country from 2005 to 2008 speaking on CDHC at HR conferences. The HR community didn’t go willingly into Consumer-driven Healthcare Land.
Of course, CFOs were early opponent of HSAs — especially if the health plan was self-funded. I heard arguments like “why give all those young, healthy workers cash (in an HSA) when we could otherwise use the funds to pay claims for older, less healthy people.” I believe that is why HRAs were use as a trial, then later HSAs were adopted because HRAs require too much paperwork.