Health savings account (HSA) growth continues at a healthy clip, according to the annual census by America’s Health Insurance Plans (AHIP), the national trade association representing the health insurance industry. AHIP’s recently released 2013 census shows that nearly 15.5 million people are covered by health savings account/high deductible health plans (HSA/HDHP) as of January 2013, up from 13.5 million in January 2012. The nearly 15 percent annual growth rate of HSA/HDHPs nationally is translating into similar growth in the number of HSAs at credit unions.
AHIP’s census also found that most of the HSA/HDHP enrollment gains were in the large group market, and that the states of Illinois, Texas, California, Ohio, and Michigan have the highest levels of HSA/HDHP enrollment. Age and gender distribution of people covered by HSA/HDHPs are almost evenly split, half male and half female, with half over age 40 and half under age 40.
This continued growth in HSA/HDHPs is the result of employers switching to consumer-directed health plans (CDHPs) that pair an HDHP with an HSA or health reimbursement account (HRA).
According to an analysis of the Mercer National Survey of Employer-Sponsored Health Plans, commissioned by the American Association of Preferred Provider Organizations (AAPPO), 36 percent of large employers and 22 percent of small employers offered CDHPs in 2012, up from 32 percent and 20 percent respectively in 2011. The AAPPO analysis also reported that, among the nation’s largest employers (20,000+ employees), 59 percent offered CDHPs in 2012, up from 48 percent in 2011.
Employers are switching to CDHPs to help curtail the rising cost of health care. The annual increase in health insurance premiums now is greater than the average wage increase and the rate of inflation. With annual premium increases for CDHPs lower than the overall average increase for traditional health plans, more employers are now switching to CDHPs. Employers that switch to CDHPs are more likely to choose an HDHP paired with an HSA—rather than an HRA—and increasingly offer an HSA/HDHP as the only plan option. The 18th Annual Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care reported that 53 percent of respondents offered an HSA/HDHP in 2013, with another 14 percent indicating that they will add an HSA/HDHP option by 2014.
This trend is likely to continue for the foreseeable future, as employers struggle to manage rising healthcare costs, and avoid triggering the excise tax on high-cost health care plans mandated by the Patient Protection and Affordable Care Act (PPACA) starting in 2018.
Although the AHIP census tracks the number of individuals covered by HSA-eligible HDHPs, it does not track the number of HSA enrollments. However, there is a direct correlation between the census findings on the growth of HSA/HDHPs and data on the growth of HSAs. As the number of employers offering HSA/HDHPs increases, along with the number of people covered by the plans, so do the number of HSAs and the dollar amounts held in them. This is good news for credit unions and is reflected in account growth at credit unions offering HSAs.
For the second year in a row, credit unions offering HSAs recorded a more than 30 percent increase in HSA deposits. HSA deposits at credit unions increased from $512 million in December 2011 to over $667 million in December 2012, 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. More than 780 credit unions offered HSAs to their members as of December 2012, up from 745 as of December 2011. Credit unions that offer HSAs have reported strong interest in HSA-eligible HDHPs among their self-employed and small business members. To help curb health care costs, many credit unions have switched to an HSA-eligible HDHP for their own employees.
Some credit unions initially offered HSAs to accommodate member requests, but increasingly credit unions see HSAs as a must-have product to help meet the needs of their self-employed and small business members. Credit unions that do not offer HSAs should consider offering them, especially in light of the changes that will result from implementation of the PPACA. The number of HSAs likely will increase dramatically over the next two years as the individual and employer mandates under PPACA kick in. Starting in 2014, individuals will be required to either buy health insurance coverage or pay a penalty, and in 2015, employers must either offer health insurance coverage to full-time employees or pay a penalty. Individuals and employers are likely to seek out low-cost health plans—such as HSA/HDHPs—to meet the PPACA requirements and avoid paying a penalty. This is good news for credit unions and a great opportunity for credit unions that offer HSAs to their members.
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 more than 9,000 financial organizations nationwide.