EBRI Issue Brief

Are HSA Investors Born or Made?

Apr 2, 2020 14  pages


Health savings accounts (HSAs) are a useful way for people covered by high-deductible health plans (HDHPs) to save for current and future health care expenditures. One of the largest strengths of HSAs — the ability to invest assets saved in the account — remains seldom used, as only 6 percent of accountholders invest at least some portion of their HSAs. This study uses the EBRI HSA Database to examine trends and patterns in who invests their account and, in particular, what factors are associated with an increased likelihood to invest. More specifically, it explores to what extent the decision to invest is endogenous to the accountholder. Investors might have systematically different attitudes from non-investors, and even given the same set of circumstances, such as deductible level and account balance, an accountholder predisposed to invest may make different choices from an accountholder predisposed to not invest. Or, accountholders may wait to hit specific benchmarks — perhaps having enough saved in their HSAs to cover deductibles or out-of-pocket maximums — before deciding to invest. In short: Are HSA investors born, or are they made?

Key Findings

  • Few HSA accountholders invest. HSAs offer generous tax benefits, making investing an attractive option for long-term health care saving, yet only 6 percent of accountholders avail themselves of the opportunity.
  • Those who do invest tend to invest right away. Most HSA investors — 63 percent — invested their HSA balances the first year EBRI observed them in our database. Of the accountholders who did not immediately invest, 62 percent did so within the first three years of account ownership.
  • Longer account tenures and higher account balances are associated with an increased probability of investing. Our analysis shows that a one-year increase in account tenure has the same positive impact on likelihood of investing as an account balance being roughly $3,250 larger.
  • There is only weak evidence to support the hypothesis that accountholders wait to accumulate a specific amount of money before investing. When plotting the distribution of account balances when accountholders transitioned to investing, there are spikes around $1,000, $3,000, and $6,000, likely signifying thresholds that at least some investors are targeting, such as required balance thresholds for investing or health plan deductibles. However, there was a great deal of variance in account balances at the time of investing, suggesting that this only describes a small share of investors.
  • Large distributions are associated with a decrease in the likelihood of transitioning to investing. Taking a large distribution — defined as at least 50 percent of the account balance — was associated with a reduced likelihood of transitioning to investing.

These findings have important implications for employers and plan sponsors that want to nudge their workers to use their HSAs for longer-term savings needs. We find that plan deductibles do not serve as a strong signal to accountholders that they should save that much before investing and that account tenure and account balance are strongly associated with an increased likelihood of investing. This suggests a familiarity effect, which means educational outreach efforts could be helpful in encouraging employees to invest. Also, giving employees seed money in their HSAs could nudge more to invest their balances more quickly.