The Employee Benefit Research Institute (EBRI) developed the EBRI HSA Database to analyze the state of and individual behavior in Health Savings Accounts (HSAs). The HSA database contains 5.5 million accounts with total assets of $11.4 billion as of Dec. 31, 2016. This Issue Brief is the first longitudinal study from the HSA database and supplements the annual cross-sectional analyses. It examines trends in account balances, individual and employer contributions, distributions, invested assets and account-owner demographics from 2011-2016. Plan sponsors who wish to introduce or continue offering HSA-eligible health plans as part of their workplace benefit program can leverage this long-term view of account holder behaviors when developing strategies to increase employee financial wellness.
On average, account holders appear to be using HSAs as specialized checking accounts rather than investment accounts. HSAs offer a valuable tax incentive to set aside money on a tax-favored basis for current or future medical expenses. However, most account holders appear to be using the accounts to cover current expenses, such as deductibles, coinsurance and copayments, rather than fully taking advantage of the tax preference by contributing the maximum.
- Average total contributions--combined individual and employer contributions--increased from $2,348 to $2,922 between 2011 and 2016. This average was just above the minimum allowable deductible amount for family coverage, but less than one-half the allowable contribution maximum for family coverage.
- Overall, 63 percent of account holders withdrew funds. The average annual amount distributed was $1,771 in 2016, implying an average rollover of $1,151.
- Very few account owners invested their HSA balance in investments other than cash despite the tax saving possibilities. In 2016, 4 percent had investments other than cash.
Longer experience with HSA improves account holder prospects for financial security. The rollover feature of HSAs enables account holders to build up a balance for unexpected major medical expenses--in the near future and/or for retirement.
- Average end-of-year balances, by the year the account was opened, show that financial security increases over time. Accounts opened in 2004 (or earlier) had an average $14,873 year-end account balance, while accounts opened in 2016 had an average $1,027 year-end account balance.
- Annual 2016 contributions are higher the longer an account owner had an account. Individual contributions averaged $3,658 among those who opened their account in 2005, but only averaged $1,290 among those who opened their account in 2016.
- Older, larger accounts offer a stronger hedge against unexpected bills. Those accounts opened in 2005 had an average annual distribution of $2,756, while those only opened in 2016 took $1,051 in distributions.
Over time, account owners appear to see the value in investing. In 2016, 11 percent of accounts opened in 2005 had investments other than cash, compared to only 1 percent among those opened in 2016. It is possible that rules requiring minimum balances may have prevented owners of relatively new accounts from investing as the accounts would not have reached the minimum balance requirement.