Health savings account (HSA) assets grew by over $5.8 billion in January 2019 to reach $59.6 billion, up 11% since the end of 2018, according to an industry report.
In addition, the total number of HSA accounts also grew by almost 5% in January, with the total rising to an estimated 26.3 million, according to Devenir’s 17th semi-annual HSA survey and resulting research report.
The report is based primarily on survey data drawn from the top 100 HSA providers in the market for the period ending Dec. 31, 2018, but it also includes supplemental data from January 2019.
Looking at the 2018 year-end data, the total number of HSAs grew to 25 million, up 13% from a year ago. HSA consumers also had accumulated nearly $54 billion in their HSAs at the end of 2018 – a year-over-year increase of 19%.
Even more impressive, Devenir projects that the HSA market will approach $75 billion in HSA assets by the end of 2020, held among nearly 30 million accounts. HSA providers also project industry asset growth of 16% in 2019, while anticipating their own businesses will grow by 23% during the same period.
According to the January data, employers were found to drive growth and there were fewer unfunded accounts compared to year-end 2018. Thirty-eight percent of HSA accounts received an employer contribution in January, consisting of nearly 60% of all contributions made to HSA accounts during the month, with an average contribution of $515.
At the end of 2018, unfunded accounts represented about 16% of all accounts, but by the end of January 2019, that number was back down to about 13%. Devenir notes that this finding appears to confirm that a significant portion of non-funded accounts in the year-end survey are attributed to accounts being opened during fall enrollment, but not being funded until the following year.
Investments and Contributions
Despite strong market headwinds, HSA investment assets reached an estimated $10.2 billion at the end of 2018, up 23% year-over-year. The report notes that, on average, investment account holders maintain a $14,617 total balance (deposit and investment account).
Contributions also jumped, with HSA account holders contributing nearly $34 billion to their accounts in 2018, up 22% from the year before. For accounts receiving an employer contribution in 2018, the average contribution amount rose to $839 (up from $604 in 2017).
“In a competitive economic environment with low unemployment, we saw employers contribute almost $9 billion to their employees’ HSAs in 2018, a meaningful increase from the previous few years,” notes Jon Robb, Devenir’s Senior Vice President of research and technology.
Short-Term vs. Long-Term
Meanwhile, the first annual HSA Spend Report from Lively, Inc., shows that the average HSA account holder will spend 93% of their savings on everyday health care costs – such as doctor visits and prescription drug costs – leaving only 7% of HSA savings to cover the cost of emergency and hospital visits.
Lively observes that this trend indicates that people will be unable to achieve the long-term benefits of investing HSA assets for the expected $280,000 in health costs in retirement (per couple, on top of Medicare coverage).
“Health care costs continue to squeeze Americans, rising faster than wages can keep up,” notes Alex Cyriac, Co-Founder and CEO of Lively. “This forces individuals and families to use their HSA funds for everyday necessities – like preventative visits, dental or vision care, and prescription drugs – rather than saving those funds to create a safety net for health care costs down the road and into retirement.”
So where did the money go? The report shows that physician and clinical services were the primary use of HSA funds in 2018 (41%), followed by prescription drugs (25%) and hospital expenses (7%).
“HSAs are the last lifeline in a sea of rising health care costs,” notes Shobin Uralil, COO and Co-Founder of Lively. “Increasing HSA contribution limits, expanding HSA eligible expenses, and letting more Americans take advantage of HSAs would help put more savings into the pockets of people across the country and further reduce the financial burden of ever-growing health care costs,” Uralil emphasizes.
The report is based on anonymous data from 15,000 randomly selected Lively users who held an HSA account in 2018, including accounts with active contributions and ones without.