Health Savings Accounts (HSAs) are putting more participants in the driver’s seat when it comes to controlling health care decisions and preventing out-of-pocket medical expenses.
And, as evidenced by the latest research, HSA adoption and expansion show no signs of slowing down.
In this post, we look at recent HSA industry trends and the drivers behind them.
HSA Asset Growth
HSAs have skyrocketed to an estimated $37 billion in assets and 20 million accounts at year-end 2016 and have grown to over $41 billion in assets during the month of January, according to the latest report from leading HSA investment advisor and consultant, Devenir.
This represents an astounding year-over-year increase of 22% for HSA assets and 20% for accounts for the period of December 31, 2015, to December 31, 2016.
Other key findings from the report include:
- Health plan partnerships were the leading driver of new account growth for HSA providers, accounting for 37% of new accounts.
- HSA investment assets reached an estimated $5.5 billion in December, up 29% year over year. The average investment account holder has a $14,971 average total balance (deposit and investment account).
- By the end of 2018, the HSA market will likely exceed $50 billion in HSA assets covering over 27 million accounts, per Devenir projections.
Driving HSA Adoption and Expansion
While account and asset growth continue to climb, Americans could soon see even more robust options available to them through their HSAs. House Republicans last week unveiled their plan for repealing/replacing the Affordable Care Act (ACA) in favor of a health care system rooted in affordability and flexibility; HSAs are the centerpiece of the proposed American Health Care Act (AHCA) legislation.
“The Republicans’ plan is more of an expansion of the HSAs. Creating greater rules around those HSAs allows greater portability, more participation with spouses and more protection from bankruptcy,” ConnectYourCare’s own Harrison Stone, General Counsel, told Employee Benefit News. “It puts more focus on the participants and less on the employer. It’s not so much a new role as more an expanded and just wider adoption.”
With proposed policy reform including the potential for increased maximum HSA contributions equal to the maximum out-of-pocket amounts allowed by law ($6,500 for individuals and $13,100 for families), as well as spousal catch-up contributions, we’re seeing consumer-directed health care ahead of the pack (and the Affordable Care Act drifting away in the rearview mirror).
You can view our on-demand webinar to learn more about the evolving legislative landscape.
More Employers Getting Behind the Wheel
While details continue to unfold, the numbers do not lie. With widespread adoption of High Deductible Health Plans and HSAs increasing in popularity, employers are certainly primed to benefit in a variety of ways.
Even under current HSA legislation, employers have the tools to help them educate and empower participants to realize their full HSA potential—everything from tax-free savings and investments to help offset high deductibles.
Moreover, by shifting added responsibility and purchasing power to the employee, employers can alleviate compliance burdens and administrative overhead. Increased savings from cost sharing, allocations which can be distributed amongst employees’ HSAs, make for a more attractive and flexible plan design.
Fueling HSA Growth Even Further
With the right tools and education, employees are willing to contribute more into their accounts, which puts them on the fast track to better engagement and proactive health. In fact, when employers accelerate their contributions to employees’ accounts to make funds available at the beginning of a plan year, very little financial risk is presented, as the employees are more likely to build up their contributions, while minimally accessing the funds available to them.
While we are seeing a year-over-year upswing in overall HSA contributions, they are still far from full throttle, considering all age groups saved less than the allowable amount in 2016. Not surprising, the Millennial generation remains the lowest contributors to HSAs when compared to other age groups (well under IRS limits); however, in 2017, Millennials increased their contributions at a higher rate than all other age groups.
The average 25-year-old employee, for example, is contributing approximately 20% more year over year.
These statistics speak to the untapped potential of HSAs, and offer encouragement as more employees think about the road to retirement and identify means for sound savings strategies, earlier on in the race.
Hear More About the Research
Join ConnectYourCare and Devenir on March 30th as we partner in our upcoming webinar, “Industry Outlook: Emerging Trends in Consumer Driven Health Care,” to discuss breaking industry trends.
Barbara Boudreau, Vice President of Strategy at ConnectYourCare, and Eric Remjeske, President/Co-Founder of Devenir, will share the results of both the ConnectYourCare survey and the recently released Devenir report.
These recognized industry experts will provide their valuable insight into the growth potential of the Consumer Driven Health Care market, adoption trends, plan usage, and suggestions for employers looking to grow employee participation in tax-advantaged accounts.