SAVERS, SPENDERS, AND HYBRIDS: HSA PARTICIPANTS DON'T ALL USE THEIR ACCOUNTS THE SAME WAY

Fidelity Investments, one of the largest financial services groups in the world, recently analyzed 74,000 of the health saving accounts (HSAs) that they administer. They found that HSA participants from 2010 averaged $2,620 dollars worth of both employer and self contributions. This growth was largely attributed to employers adopting HSA-qualified health plans in higher numbers due to the combination of rising health care costs and health reform. The analysis also found that participants of employer-provided HSAs don't all use their HSAs the same way.

Contributions. An HSA participant must be enrolled in an HSA-qualified high-deductible health plan (HDHP) in order to make HSA contributions. The HDHP minimum deductible amounts for 2011 are the same as they were in 2010 - $2,400 for family coverage and $1,200 for individual coverage.

The legal maximum contribution for 2011 was also unchanged from 2010 - $6,150 for families and $3,050 for individuals. Fidelity found that around 46% of the participants had both self and employer contributions of at least $2,500 in 2010. Another 17% had contributions totaling over 5,000 dollars.

Spending Behavior. The analysis found three different categories of spending behavior among the HSA participants:

  • At 24%, the least amount of participants was categorized as savers. This means they didn't use more than 9% of their annual contributions and invested the large remaining balances for their future health expenses.
  • At 36%, around a third of the participants were categorized as spenders. This means they used over 90% of their HSA contributions for the year and had little, if any, balance to carry over and save.
  • At 40%, most of the participants were categorized as hybrids. This means they used anywhere from 10% to 90% of their HSA contributions for the year and carried over the remaining balance.

Tax Benefits. An HSA participant can make pretax contributions through salary deferral, withdraw funds for qualified medical expenses that aren't subject to federal taxes and that usually aren't subject to state taxes, and gain growth on their contributions that's tax-free.

Most HSA participants aren't just using their accounts to manage current medical expenses. HSA balances, unlike balances of flexible spending accounts, will carry over each year. In other words, the HSA participant doesn't have to use the funds just to keep from losing them. Fidelity found that almost all the participants, at 95%, carried over some amount of balance to the next year. Since participants can grow their account balances to pay for future health care costs, such as those that they may experience after retirement, HSAs can also be used to mange longer-term health care saving needs.

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