Credit unions entered the health savings account (HSA) market early and have seen successful growth, but the number of credit unions in this business is still low–an estimate of just over 14 percent. With recent studies showing rapid growth in the HSA market, this is an opportune time for credit unions to consider joining in.
HSA growth continued at a rapid rate last year as credit unions offering HSAs recorded a more than 17 percent increase in HSA deposits. As of year-end 2016, credit unions held $1.38 billion in HSA deposits, up from $1.17 billion as of year-end 2015, according to call report data analyzed by the Economics and Statistics Department of the Credit Union National Association (CUNA).
These findings are consistent with the results of the 2016 Year-End Devenir HSA Market Survey, which is a survey primarily of the top 100 HSA providers. The results of this survey show a 22 percent increase in HSA assets from 2015 to 2016, with the number of HSAs now exceeding 20 million. Ascensus® partners with Devenir to offer the Devenir myHSAinvestments® solution and private-label HSA investment platform to banks and credit unions.
HSA Growth Tied to Health Plan Coverage
The growth in the number of HSAs results primarily from the growth in consumer-directed health plans (CDHPs) that are paired with an HSA or health reimbursement arrangement (HRA). The 2016 Employee Benefits Research Institute (EBRI)/Greenwald & Associates Consumer Engagement in Health Care Survey reported that 14 percent of privately insured adults were enrolled in a CDHP. And, while more than half of CDHP enrollees (56 percent) opened an HSA, the survey reported that 25 percent of CDHP enrollees were enrolled in an HSA-eligible plan but had not opened an HSA. The other 19 percent of CDHP enrollees were enrolled in an HRA and were not eligible to open an HSA.
Employer Contributions Help Drive HSA Deposit Growth
CDHP enrollees are frequently opening HSAs in part to take advantage of employer contributions. Employers initially made contributions to their employees’ HSAs as an incentive for employees to choose CDHPs over traditional medical plans. Even as CDHPs have increasingly become the only plan option at larger employers, most employers still make contributions to their employees’ HSAs. And, the percentage of employers making contributions and the dollar amount of employer contributions continues to rise.
The EBRI survey found that 78 percent of CDHP enrollees reported that their employer contributed to their HSA, up from 67 percent in 2014. The survey found that 20 percent of CDHP enrollees reported an employer HSA contribution of $2,000 or more in 2016, and 42 percent of CDHP enrollees reported an employer HSA contribution of $1,000 – $1,999 in 2016, up from 10 percent and 36 percent, respectively, in 2014.
The Devenir survey found that in 2016, employer contributions accounted for 26 percent and employee contributions accounted for 46 percent of all HSA contributions. Among employers making contributions, the average employer contribution was $868, and among employees making contributions, the average employee contribution was $1,786. The other 19 percent of all HSA contributions came from individuals and were made to accounts not associated with an employer. The average contribution made to these HSAs, for individuals making contributions, was $1,713, according to Devenir’s findings.
HSA Usage Continues to Evolve
As the number of HSAs and the dollars held in them continue to increase, so does the average account balance. And as CHDP enrollees become more familiar with the advantages of an HSA, their usage of the account begins to evolve.
Many HSA owners still use their HSA primarily as a transactional account to pay for qualified medical expenses. However, more HSA owners are starting to treat their HSA as an investment account to pay for future medical expenses. As their account balances grow, these HSA owners increasing look to invest a portion of their HSA assets in stocks, bonds, and mutual funds. More than 15 percent of all HSA assets at year-end 2016 were held in investments—rather than traditional deposit products—and with an average total account balance of $14,971 (deposits and investments). An HSA investment holder’s average account balance is seven times larger than a non-investment holder’s average account balance, according to the Devenir survey.
HSA Market Opportunities Abound for Credit Unions
Those credit unions that have entered the HSA market are finding great success. But HSA penetration in the credit union space is low. As of year-end 2016, less than 15 percent of credit unions (838 out of 5,906) offered HSAs to their members. And, while HSA deposits at credit unions increased nearly 170 percent over the last five years—from $512 million at year-end 2011 to $1.38 billion at year-end 2016—the number of credit unions offering HSAs increased by less than 13 percent, from 745 to 838, according to CUNA’s analysis of call report data.
Clearly, credit unions that are offering HSAs are seeing success. The numbers alone should be a message for those credit unions that are not offering HSAs.