Plan sponsors that wish to introduce or continue offering health savings account (HSA)-eligible health plans as part of their workplace benefit program can benefit from a long-term view of HSA accountholder behaviors. As such, the Employee Benefit Research Institute (EBRI) has undertaken a series of longitudinal studies from its HSA Database, examining trends in account balances, individual and employer contributions, distributions, invested assets, and account-owner demographics from 2011‒2021. Such analysis can help not only plan sponsors but providers and policymakers better understand strategies that can help improve employee financial wellness.
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 13.1 million accounts with total assets of $39.5 billion as of Dec. 31, 2021.
HSAs offer a triple tax advantage to accountholders, enabling them to stretch money earmarked for health care expenses further than they otherwise could. The tax benefits of HSAs are maximized when accountholders contribute the statutory maximum and minimize withdrawals for current medical expenditures — if they are able — and invest their HSA balances in assets other than cash. However, the majority of accountholders seem to use their HSAs to pay for current expenses and do not take complete advantage of the tax benefits HSAs offer. Average contributions are well below the statutory maximum, most accountholders take a distribution from their HSA, and relatively few accountholders invest. This is not to say, however, that the picture is bleak; despite increased health care spending in the wake of the COVID-19 pandemic, average balances in HSAs increased since 2020, rising from $3,622 to $4,318 in 2021. And, encouragingly, the share of accountholders who invest their HSAs has crept steadily upward since EBRI began analyzing its HSA Database.
From this study, we observe the following about HSA utilization:
- Relatively low balances: Since the establishment of EBRI’s HSA Database, average account balances have generally trended upward. End-of-year balances increased in 2021, but overall, average balances are still modest.
- Contributions below the maximum: Both the average employee and employer contributions decreased relative to 2020. The average combined HSA contribution in 2021 was $927 less than the statutory maximum contribution for individuals and $4,527 less than the statutory maximum contribution for accountholders with family coverage.
- High incidence of withdrawals: Overall, just over half of accountholders withdrew funds. The average distribution increased slightly relative to 2020, when fewer patients sought health care services on account of the COVID-19 pandemic.
- Low use of investments: Few accountholders took advantage of the ability to invest HSA funds, as only 12 percent of accountholders invested in assets other than cash. However, the share of accountholders who invested their HSAs has increased five years in a row and saw its largest year-over-year increase in 2021.
In addition to tax benefits, HSAs also allow accountholders to roll over their balances from year to year to accumulate more savings for future medical expenditures, as well as medical expenditures in retirement. Medical expenses in retirement can be substantial, with married couples potentially needing to save as much as $383,000 (Spiegel and Fronstin 2023). On average, accountholders appear to be using HSAs as specialized checking accounts rather than investment accounts, though this behavior appears to change the longer an HSA owner holds an account. Over the past decade of conducting longitudinal analysis of its HSA Database, EBRI finds evidence that the longer an accountholder has had their HSA, the higher the likelihood that the accountholder invests their HSA in assets other than cash, in addition to contributing more on average and enjoying higher account balances.