More employers offering HSA-compatible health plans means more HSAs

Consumer-directed health plans, such as HSA-compatible high-deductible health plans (HDHPs), are now the norm among large employers, according to an annual survey of large employers by the National Business Group on Health. Its Large Employers’ 2017 Health Plan Design Survey found that 84 percent of survey respondents are offering at least one consumer-directed health plan as an option in 2017, with an HSA-compatible high-deductible health plan the most popular design option. In fact, 35 percent of responding employers will offer only consumer-directed health plans to their employees.

This means that the millions of American workers selecting their health plans for next year during the fall open enrollment period will likely have the option to select an HSA-compatible HDHP. And, in many cases, it may be their only plan option. Consequently, more workers will need an HSA.

This trend is expected to continue for the foreseeable future as employers struggle to contain rising health care costs. More than half (53 percent) of the survey participants reported that implementing a consumer-directed health plan option or offering only consumer-directed health plans was one of their most effective tactics for controlling rising health care costs. The survey found that by 2019, it is possible that nine out of ten large employers will offer at least one consumer-directed health plan.

Enrollment in HSA-compatible HDHPs increased 22 percent from 2014 to 2015 among health plans participating in an annual census conducted by America’s Health Insurance Plans (AHIP). In its 2015 Census of Health Savings Account – High Deductible Health Plans, AHIP reported that HSA-compatible HDHP enrollment reached 19.7 million in January 2015, the most recent period for which data is available. This double-digit increase in HSA-compatible HDHP enrollment correlates directly to the increase in the number of HSAs.

The number of HSAs rose to 18.2 million as of June 30, 2016, a 25 percent increase from the same period last year, according to findings derived from the 2016 Midyear Devenir HSA Research Report. This trend is expected to continue, with Devenir projecting that the number of HSAs will exceed 27 million by the end of 2018.

HSA growth is fueling the growth in HSA assets, which reached $34.7 billion as of June 30, 2016, a 22 percent increase from the same period last year, according to the Devenir survey. The survey also found that average HSA balances are increasing, fewer HSAs are unfunded, and more HSA owners are choosing investment options for their HSA assets.

Some of the growth in HSA balances results from employer contributions to employee HSAs. The National Business Group on Health survey found that the vast majority of employers that offer HSA-compatible HDHPs make contributions to employee HSAs. Employers use a variety of funding options, such as making an initial contribution to “fund” the HSA, contributing a predetermined amount each year, or matching employee contributions. The median employer HSA contribution is $600 for self-only coverage and $1,100 for family coverage. Only 15 percent of employers offering an HSA-compatible HDHP do not make any employer contributions to employee HSAs.

The growth in the number of HSAs and HSA assets nationally is reflected in the growth at credit unions that offer HSAs to their members. Credit unions offering HSAs reported double-digit growth in HSA deposits last year, according to call report data analyzed by the Economics and Statistics Department of the Credit Union National Association. As of the most recent call report data, credit unions held more than $1.3 billion in HSA deposits, representing nearly four percent of the total HSA market.

Credit unions that were early entrants into the HSA market have built substantial HSA portfolios. For many of these credit unions, the size of their HSA portfolio—in terms of numbers of accounts—exceeds the size of their IRA portfolio. Unfortunately, less than 15 percent of all credit unions offer HSAs to their members.

Although there are many reasons why credit unions do not offer HSAs, there are compelling reasons for credit unions to offer them. The continued double-digit growth in the number of HSAs and HSA deposits—nationwide and at credit unions—can no longer be ignored and should prompt credit unions not offering HSAs to offer them.

Credit unions that offer HSAs benefit from increased revenue through account, transaction, and maintenance fees, deeper relationships with members and small business owners, and potential partnerships with insurance agents and brokers who want to refer their clients to a local HSA custodian. Credit union members benefit from lower account, transaction, and maintenance fees, local account servicing, and having their HSA at their primary financial institution. That is a win for both credit unions and their members.

Dennis Zuehlke

Dennis Zuehlke

Dennis is Compliance Manager for Ascensus. 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 ... Web: www.ascensus.com Details