Record HSA growth creates opportunity for credit unions

In the 10 years since health savings accounts (HSAs) first became available, HSA ownership has grown considerably. According to the annual census by America’s Health Insurance Plans (AHIP), as of January 2014, 17.4 million people had enrolled in HSA/high deductible health plans (HDHPs). This is up from 15.5 million in January 2013 and represents an average annual growth rate of 15 percent since 2011 (Center for Policy and Research, America’s Health Insurance Plans, “January 2014 Census”, July 2014, accessed August 2014, www.ahip.org/Press-Room/2014/HSA-Census-Survey). This double-digit growth rate creates several opportunities for credit unions to maximize their HSA programs.

Much of the increase in HSA/HDHP coverage is occurring in the large group market, defined as employers with more than 50 employees. In 2014, the AHIP census found that 74 percent of all individuals enrolled in an HSA/HDHP were in the large group market. This percentage has increased each year since 2005 as HSA/HDHP adoption has shifted from individuals and small businesses to large businesses. Among large employers—those with 500 or more employees—32 percent offered an HSA/HDHP in 2013.

The number of HSA/HDHP enrollees has grown each year since AHIP conducted its first census and reported that enrollment in HSA/HDHPs reached one million people in March 2005. And this trend is likely to continue and accelerate in the future, driven by a number of market forces that include the following.

1. Annual increases in health insurance premiums. Testifying before the House Committee on Ways and Means, then Health and Human Services Secretary Kathleen Sebelius said that health insurance premiums are “likely to go up” in 2015, just as they did in 2014. The annual rate of increase in health insurance premiums is now greater than the average annual wage increase and the rate of inflation. These premium increases make HSA-compatible HDHPs a more attractive insurance option, as HDHPs have lower premium rates than other types of health plans, and the rate of premium increases for HDHPs tends to be lower than for other types of plans.
2. Wide availability of HSA/HDHPs on healthcare exchanges. Despite predictions that the Patient Protection and Affordable Care Act (PPACA) would be the demise of HSAs, HSA/HDHPs are available on www.healthcare.gov and many of the state-run healthcare exchanges. These HSA/HDHPs generally are among the least expensive plans available on the exchanges, making them an attractive option for consumers.
3. Large employers switching to HSA/HDHPs. As healthcare costs continue to rise, employers are continuing to switch to HSA/HDHPs to curb costs. Two-thirds of employers participating in the 2014 Health and Well-being Touchstone Survey conducted by PricewaterhouseCoopers (PWC) offered HDHPs. And 47 percent of respondents offered an HSA/HDHP plan (up from 39 percent last year). Average enrollment in those plans increased from 20.5 percent in 2010 to 39.2 percent in 2014. And, while just a few years ago, large employers offered an HSA/HDHP as one of several options, increasingly they are offering an HSA/HDHP as the only option. Among survey respondents, 44 percent are considering replacing their existing health plan with an HDHP, and 18 percent of respondents already offer an HDHP as their only option (PricewaterhouseCoopers, “2014 Health and Well-being Touchstone Survey”, June 2014, accessed August 2014, www.pwc.com/us/en/hr-management/publications/health-well-being-touchstone-survey.jhtml).

Although the AHIP census tracks the number of individuals covered by HSA/HDHPs, it does not track the number of HSA enrollments. But 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.

Credit unions offering HSAs recorded a more than 27 percent increase in HSA deposits last year. HSA deposits at credit unions increased from $667 million in December 2012 to over $850 million in December 2013, according to call report data analyzed by the Credit Union National Association’s Economics and Statistics Department. Credit unions also recorded double-digit growth in the number of HSAs, with credit unions participating in the Ascensus Fully-Administered HSA Program reporting a nearly 20 percent increase in the number of HSAs from 2012 to 2013. As of December 2013, more than 780 credit unions offered HSAs to their members.

We expect this growth trend to accelerate in the future. Although some credit unions initially offered HSAs to accommodate member requests, increasingly credit unions see HSAs as a must-have product for their self-employed and small business members. If your credit union currently is not offering HSAs, you should consider offering them, given the number of employers adopting HSA/HDHPs. And with the changes in the healthcare marketplace, HSA/HDHPs are an attractive health insurance option.