by: Dennis Zuehlke, Compliance Manager, Ascensus
Health savings accounts (HSAs) and the requisite high deductible health plan (HDHP) have continued to grow in popularity since HSAs first became available in 2004. According to the Center for Policy and Research at America’s Health Insurance Plans (AHIP)—the national association representing nearly 1,300 member companies providing health insurance coverage to more than 200 million Americans—the number of individuals covered by HSA/HDHPs increased by more than 18 percent over last year. In a report released in May 2012, AHIP also stated that more than 13.5 million individuals are now covered by HSA/HDHPs.
This figure, based on HSA/HDHP coverage as of January 2012, is up from 11.4 million in January 2011, and 10 million as of January 2010. The number of individuals covered by HSA/HDHPs has increased each year since AHIP first conducted its annual census in March 2005, and has tripled over the last five years, from 4.5 million in January 2007, to 13.5 million today.
The AHIP census found that HSA/HDHP coverage in 2011 increased in both the individual and group markets. In the individual market, enrollment rose from 2.4 million in 2011, to 2.5 million in 2012. In the group market, enrollment rose to 11 million, up from 9.1 million in 2011. The large-group market was the fastest growing market for HSA/HDHP coverage, which rose by 26 percent, followed by the small-group market which grew by 9 percent.
Much of this growth in coverage is tied to employers adopting HSA-eligible HDHPs. According to Mercer’s National Survey of Employer-Sponsored Health Plans, 32 percent of all employers with 500 or more employees now offer a consumer-directed health plan (CDHP) with either an HSA or health reimbursement arrangement (HRA). The Mercer survey found that last year recorded the largest increase ever in the adoption of high deductible CDHPs by large employers. This trend is likely to continue as employers look for ways to control health care costs. With average medical plan costs nearing $10,000 per employee, employers can save money by switching to HSA-eligible HDHPs. These plans cost nearly 20 percent less than other medical plans in 2011, even when including the cost of employer contributions to the HSA, according to the Mercer survey.
Although the AHIP survey tracks the number of individuals covered by HSA-eligible HDHPs, it does not track the number of HSA enrollments. But there is a direct correlation between the survey findings on the growth of HDHPs and data on the growth of HSAs at financial organizations. As the number of individuals covered by HDHPs increases, so does the number of HSAs—and this is good news for credit unions that offer HSAs to their members.
JPMorgan Chase, the nation’s largest bank by assets, has seen significant growth in its HSA business, reporting earlier this year that it added more than 200,000 HSAs between April 2011 and February 2012. JPMorgan Chase also reported that it now administers more than 900,000 HSAs with over $1.5 billion in HSA deposits.
Bank of America, the nation’s second largest bank, also reported record HSA growth, announcing earlier this year that it added more than 50,000 HSAs in 2011—a record 34 percent increase over the previous year. Bank of America stated that HSAs are the fastest growing segment of its health benefit solutions, which include HSAs, HRAs, and flexible spending accounts (FSAs). The bank estimated that it now administers nearly 200,000 HSAs with over $300 million in HSA deposits.
These results are consistent with HSA growth at credit unions, which recorded a more than 30 percent increase in HSA deposits last year. HSA deposits at credit unions increased from $386 million in December 2010 to over $512 million in December 2011, according to call report data analyzed by the Economics and Statistics Department of the Credit Union National Association, the national trade association serving credit unions. Nearly 750 credit unions offered HSAs to their members as of December 2011, up from 703 as of December 2010. Credit unions offering HSAs report strong interest in HSA-eligible HDHPs among their self-employed and small business members.
If your credit union doesn’t offer HSAs you should consider doing so. Credit unions and their members can benefit from HSA-eligible HDHPs in a number of ways. As an employer, credit unions can offer an HSA-eligible HDHP to their employees as way to curb health care costs, yet offer a quality health plan to their employees. And, unlike FSAs, unused HSA money rolls over from year-to-year to pay future health care costs. As a financial organization, credit unions can offer HSAs to their members. HSAs are easy to administer and provide a new source of deposit growth. And, with credit unions looking to tap the small business market, HSAs provide yet another option to meet the needs of small businesses and the self-employed.
Dennis Zuehlke is Compliance Manager for Ascensus in Middleton, Wisconsin. Mr. Zuehlke provides clients with technical support on tax-advantaged accounts (including individual retirement accounts, health savings accounts, simplified employee pension plans, and Coverdell education savings accounts), and information reporting and tax withholding issues. Mr. Zuehlke is a frequent national speaker on compliance-related issues and retirement savings trends within the financial services industry.
Mr. Zuehlke attended Marquette University and graduated from the University of Wisconsin. Prior to joining Ascensus, he held a similar position with the Credit Union National Association.
Ascensus delivers a full range of retirement plan services—including plan administration, plan design and maintenance, consulting, web-based tools and content, software solutions, education and training, forms and documents, and technical resources—to approximately 9,000 financial organizations nationwide. www.ascensus.com